The £6.8bn takeover of Asda by a private equity consortium fronted by the Blackburn-based petrol station billionaire brothers Mohsin and Zuber Issa could lead to higher fuel prices in some parts of the UK, the UK competition watchdog has warned.
The Issa brothers and TDR Capital co-own the petrol station operator EG Group, which has 395 UK petrol stations while Asda owns 323. The Competition and Markets Authority (CMA) said many of the forecourts were located in the same parts of the country and it was concerned about these overlaps.
Joel Bamford, the CMA’s senior director of mergers, said: “Our job is to protect consumers by making sure there continues to be strong competition between petrol stations, which leads to lower prices at the pump. These are two key players in the market, and it’s important that we thoroughly analyse the deal to make sure that people don’t end up paying over the odds.
“Right now, we’re concerned the merger could lead to higher prices for motorists in certain parts of the UK. However, if the companies can provide a clearcut solution to address our concerns, we won’t carry out an in-depth phase 2 investigation.”
The buyers now have five working days to put forward a proposal to address the competition concerns identified. The CMA then has a further five working days to consider whether to accept the plan or refer the deal for further investigation.
A spokesperson for the Issa brothers and TDR Capital said: “We will be working constructively with the CMA over the course of the next 10 days in order to arrive at a satisfactory outcome for all parties within phase 1. This would provide welcome certainty for our colleagues, suppliers and customers, and allow us to move forward with our exciting plans for investment and growth at Asda.”
The sale of Asda to the Issas and TDR Capital is the biggest British leveraged buyout in more than 10 years. The investors, who already co-own the petrol station operator EG Group, have put less than £800m of their own money into the deal, which is backed with nearly £4bn of debt and £1.7bn raised by selling off Asda’s warehouses and petrol stations.
The CMA found local competition concerns in relation to the supply of road fuel in 36 areas across the UK and the supply of a specific type of fuel, auto-LPG, in a further area. It is therefore concerned that the merger could lead to higher prices for motorists in these locations.
The deal was the second attempt by the US retail giant Walmart to sell the Leeds-based supermarket, which employs more than 140,000 people. In 2019 the CMA blocked the first try – an audacious attempt to merge Asda with its larger rival Sainsbury’s.
The Issa brothers, who leased their first petrol station in 1999, now have more than 6,000 in 10 countries. The move on Asda has not stopped the expansion of EG Group, which has just bought the fast food chain Leon Restaurants for £100m and is also trying to buy the struggling Caffè Nero chain.
The Issas and TDR have equal shareholdings in Asda, while Walmart has retained a minority holding following the deal, which was announced last autumn.
The sale has already heralded senior management changes at Asda as Roger Burnley, its chief executive of three years, has already announced that he will depart next year. Rob McWilliam, its chief financial officer, is also going.
The change of ownerships adds to the uncertainty faced by the staff who work in Asda’s 341 supermarkets and who have in recent years faced successive rounds of job cuts.
Last week Asda said it planned to stop baking bread in its stores, a change that will puts 1,200 jobs at risk. The latest shake-up comes less than two months after Asda said 5,000 jobs were at risk from the closure of two warehouses and back-office changes.