FATCAT supermarket owners have been accused of ripping off drivers to lower the debt built up in takeovers
Two of the UK’s biggest chains — Morrisons and Asda — have now clocked up more than £10billion of debt in total.
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Yet bosses live in swanky mansions, fly in private jets and enjoy down time on huge holiday estates.
Morrisons and Asda were named and shamed this week by the competition watchdog for driving up petrol profit margins.
The Competition and Markets Authority found supermarkets overcharging by up to 6p a litre.
Both chains were recently taken over in debt-driven deals that put even more pressure on them to make a profit.
Secretive Nate Sleeper is CEO of investors Clayton Dubilier and Rice (CD&R) which bought Morrisons for £7billion.
He lives in a 6,000 sq ft, four-storey townhouse, built in 1899 in Manhattan’s Upper East Side, reportedly bought for £6.9million in 2012.
Neighbours include Madonna, Woody Allen and Drew Barrymore.
Nate, wife Carole and their three kids spend weekends at their £3million rural retreat, two hours from the city in the Catskill Mountains.
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Carole, a former schoolteacher, married Nate after he graduated from Harvard Business School.
He became CEO of CD&R in 2020 and within two years the firm had negotiated the Morrisons deal.
In 2021, the business had £2billion borrowings.
That has now shot up to £5.5billion — triggering large interest payments and leaving it vulnerable to soaring rates.
The chain, with more than 110,000 staff, racked up so much debt in the year after the takeover that it faced about £400million finance costs to pay off annual interest.
But Morrisons chief executive David Potts recently said the business was “combining well with CD&R to be more effective” and was on track to increase profits after “a year of transition”.
Meanwhile Asda was bought two years ago by Blackburn-based brothers Mohsin and Zuber Issa, who teamed up with private equity firm TDR Capital in a £6.8billion deal.
It has since emerged the brothers and TDR put less than £200million of their own cash in, with the rest funded with a shedload of debt.
Asda has a £5.1billion debt pile and its £2.3billion petrol station deal with EG Group — also owned by the Issas — has seen the supermarket move around more debt.
The brothers’ Euro Garages chain of petrol stations and convenience stores has expanded across Europe, Australia and the US, and has annual sales over £20billion.
Mohsin, 51, and Zuber, 50, are the sons of Indians migrants.
The boys worked in their parents’ petrol station before building an empire of 6,000 forecourts with 44,000 staff.
Vulnerable to rates
Their wealth is estimated at £3.6billion.
In 2018, they won permission to knock down eight houses near their childhood home, and build five identical mansions for them and their relatives.
The same year, the family men faced controversy for buying two private jets using interest-free loans from EG.
They splashed out £25million on a mansion in London’s Knightsbridge in 2017.
Renovations including adding a garage with vehicle lift, a swimming pool, cinema, plus three extra bedrooms have taken the value to around £80million.
Asda Group made a £1billion UK pre-tax profit for 2021.
But it used accounting rules to ultimately pay zero tax — and even pocket a £2million government tax credit.
It did so by selling a chunk of warehouses to two other parts of its group, which it then sold to American investment giant Blackstone — before renting them back.
The CMA pointed out Asda and Morrisons historically had the cheapest forecourt deals — but that those savings have dried up since the multi-billion deals in 2021.
Retail analyst Clive Black told The Sun on Sunday: “Higher fuel margins helped to service the cost of high debt at Asda and Morrisons.”
An Asda spokesman said: “The CMA confirmed that Asda is the UK’s cheapest fuel retailer and that the presence of an Asda petrol station in a local area keeps prices down for all motorists.”
How to cash in
PRIVATE equity firms often say they can run companies more effectively by bringing in a crack team focused on efficiency and stripping out costs.
They buy businesses using a mixture of debt raised from investors and the target company’s own assets — including cash on its balance sheet and property owned.
By only putting in a little of their own cash to fund a takeover, the firms limit their risk — and have the potential to make even bigger profits.
The debt loaded on the target company has to be repaid by the business as annual interest repayments.
This means if interest rates shoot higher, the company will be under even more pressure to generate cash to pay for the more expensive debt.
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