US retailer Walmart pulled out of Britain's grocery market after selling control of Asda to TDR Capital and two British billionaire brothers in a deal valued at £6.8 billion ($8.79bn).
Under the new ownership structure, brothers Mohsin and Zuber Issa, founders and co-chief executives of petrol station retailer EG Group, and private equity company TDR Capital, will acquire a majority stake in the supermarket chain on a debt-free and cash-free basis, according to a statement on Asda’s website. Walmart, the world’s largest retailer, will retain a minority stake and a seat on the board.
“Asda has been a powerhouse of innovation for the rest of the Walmart world, and we look forward to continuing to learn from them in the future,” said Judith McKenna, president and chief executive of Walmart International.
The agreement comes more than a year after regulators rejected a £7.3bn bid from rival supermarket chain Sainsbury’s to acquire Asda amid concerns the merged company would dominate Britain’s grocery sector. Walmart then revived sales talks for the supermarket this year.
Like most British supermarket chains, Asda’s fortunes have improved during the Covid-19 outbreak as shoppers stocked up on staples to help them survive the lockdown.
“In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth,” said Roger Burnley, chief executive of Asda.
Walmart had been looking to offload Asda for at least two years and will now focus on the US market, where it earns three-quarters of its revenue. The retailer has owned Asda since 1999, when it purchased the supermarket chain for £6.7bn.
Asda’s new owners said the supermarket’s base would remain in Leeds and that Mr Burnley will remain as chief executive and also form part of the board that will include representatives appointed by the Issa brothers, TDR Capital and Walmart.
The brothers also committed to invest £1bn over the next three years to strengthen the business’s supply chain and pledged to keep prices low across its stores – something the grocer is renowned for – amid tough economic conditions. Britain's economy has been hammered by the effects of Covid-19 with gross domestic product falling 19.8 per cent in the second quarter and the country facing the potential of new tariffs on imported food when the UK exits the European Union.
The brothers also pledged to boost the proportion of UK-based suppliers at Asda - increasing the volume of products, such as chicken, dairy, wheat and potatoes purchased from within the UK each year - and committed to source 100 per cent of beef from within the country.
“Asda’s performance through the Covid-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth,” the Issa brothers said in a statement.
The pair are the founders of Euro Garages, which has more than 6,000 petrol stations and convenience stores in Europe, North America and Australia.
Britain’s Chancellor of the Exchequer Rishi Sunak tweeted that it is “great to see Asda returning to majority U.K. ownership for the first time in two decades".
The buyers are seeking about £4bn pounds of debt financing from banks including Barclays, Bank of America, Deutsche Bank, Lloyds, Morgan Stanley and Rabobank, according to Bloomberg sources.
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UAE currency: the story behind the money in your pockets
The National Archives, Abu Dhabi
Founded over 50 years ago, the National Archives collects valuable historical material relating to the UAE, and is the oldest and richest archive relating to the Arabian Gulf.
Much of the material can be viewed on line at the Arabian Gulf Digital Archive - https://www.agda.ae/en
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
GOLF’S RAHMBO
- 5 wins in 22 months as pro
- Three wins in past 10 starts
- 45 pro starts worldwide: 5 wins, 17 top 5s
- Ranked 551th in world on debut, now No 4 (was No 2 earlier this year)
- 5th player in last 30 years to win 3 European Tour and 2 PGA Tour titles before age 24 (Woods, Garcia, McIlroy, Spieth)
