Private-equity group Apollo leads £6.5bn race to buy Asda
The private-equity firm Apollo Global Management is thought to have edged into the lead in the £6.5bn bidding war for Asda after its rival Lone Star Funds dropped out.
It is believed that a third bid from private equity firm TDR Capital remains in the running – the group is understood to have been working on a deal with the billionaire Issa brothers, who are behind the British forecourts operator EG Group.
The brothers, who are also trying to buy Australia’s Caltex forecourts group, are putting their own money into the Asda bid rather than bidding via EG, according to the Telegraph, which first reported Lone Star’s exit.
However, the TDR-backed deal is likely to prove less attractive to Asda and its US parent group Walmart, as it could lead to attention from competition regulators and potentially a lengthy inquiry.
Regulators blocked Walmart’s earlier attempt to quit the UK by merging Asda with Sainsbury’s.
Apollo, which is working with the retail veteran Rob Templeman, the former boss of Debenhams, is thought to be planning a more straightforward deal based on expanding Asda’s online presence.
Lone Star, whose bid was fronted by the former Asda and Somerfield executive Paul Mason, is understood to have dropped out as it could not match the price being offered by Apollo.
While Asda, the UK’s third largest supermarket with more than 600 stores, has performed well during the pandemic, there are concerns about the effect on its profits from a switch to online shopping and higher staffing costs linked to the pandemic.
Potential liabilities linked to an equal pay dispute currently being considered by the UK supreme court are also a concern for bidders.
Walmart restarted talks on the sale of a stake in its UK arm in July, 15 months after the collapse of the planned merger with Sainsbury’s. A deal is expected to be announced by the end of this month.
Talks involving Lone Star and Apollo and TDR Capital were paused in April after the coronavirus pandemic reached the UK.
Walmart, which bought Asda in 1999, is expected to retain a minority stake in the supermarket as part of the deal.
The group is thought to want to float Asda on the stock market, but that ambition could be years away, given the volatility of markets. It views a private equity deal as a way to secure new investment in Asda in preparation for any initial public offering.
While no price for Asda has been confirmed, the chain, which accounts for about 15% of the UK’s grocery market, was valued at about £7bn at the time of the planned merger with Sainsbury’s.
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