Asda’s £6.8billion takeover by billionaire petrol station tycoons could lead to higher prices at the pumps, according to regulators.
The Competition and Markets Authority said the sale of Britain’s third-largest supermarket to the Issa brothers raised concerns about the cost of fuel in many areas of the country.
Zuber and Mohsin Issa already own 395 petrol stations through their EG Group empire while Asda owns 323.
Zuber and Mohsin Issa already own 395 petrol stations through their EG Group empire while Asda owns 323
The deal will turn EG – which is backed by private equity group TDR Capital – into the UK’s second largest forecourt business with 718 sites.
But the CMA warned it could kill off competition between petrol stations in 37 areas of the country – hitting motorists in the pocket.
EG has five days to come up with a proposal to address the watchdog’s concerns.
Joel Bamford, a director at the CMA, said: ‘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.’
The CMA’s intervention is the last thing standing in the way of the sale of Asda by US owner Walmart. An earlier attempt by Walmart to sell the supermarket chain to Sainsbury’s was blocked by the CMA in 2019.
The purchase of Asda will propel the Issas into Britain’s business aristocracy two decades after the pair started with a single petrol station in Bury.
But the financial acrobatics to complete the deal, the UK’s biggest leveraged buyout in more than ten years, have already raised eyebrows in the City.
The Issas plan to sell and lease back Asda’s logistics division, raising over £1billion, and borrow £3.5billion against the grocer’s balance sheet to fund the debt-fuelled acquisition. Asda will sell the petrol station business to EG Group for £750million, which will also be funded by debt.
It is likely the brothers expected the CMA to intervene as ‘many of Asda’s and EG’s petrol stations are located in the same parts of the UK’, according to a statement from the regulator.
Only Motor Fuel Group, which has 900 stations operating under the BP, Shell, Esso, Texaco, JET and Murco brands, would be bigger.
Other significant players include Rontec, which has 260 petrol stations in the UK, and Applegreen, which has 559 forecourts and service stations across Ireland, the UK and the US. In total the UK has around 8,300 petrol stations.
To allay the regulator’s fears, EG could either offer to sell individual sites to open up competition in the 37 areas identified or give a formal commitment not to raise prices. If the CMA does not accept the proposals, it has five days to launch a more advanced ‘phase 2’ investigation.
A spokesman for the Issa brothers and TDR Capital: ‘We will be working constructively with the CMA over the course of the next ten days in order to arrive at a satisfactory outcome for all parties.’
