Kirkland, Latham and Skadden check in for Asda’s £2.3bn acquisition of EG petrol chain arm

Addleshaw Goddard and Allen & Overy also act in deal to create retail group with £30bn combined revenue

A raft of firms including Kirkland & Ellis, Latham & Watkins and Skadden Arps Slate Meagher & Flom are acting in Asda’s £2.3bn acquisition of EG Group’s UK and Ireland business. 

The long-awaited tie-up of the two groups, both owned by the billionaire Issa brothers and the private equity firm TDR Capital, will create a company with combined revenue of almost £30bn. Asda, the UK’s third largest grocer after Tescos and Sainsbury’s, will buy the bulk of EG’s UK and Ireland petrol stations and food-to-go locations for an enterprise value of £2.27bn to speed its move into the convenience sector. 

Teams from Kirkland & Ellis, Addleshaw Goddard and Latham & Watkins have advised Asda on the deal, while Allen & Overy has acted as counsel to lender Apollo Global. Meantime EG has been counselled by Skadden Arps Slate Meagher & Flom. 

Latham’s London-based team was led by high yield partner Francesco Lione and associate Lyndy Amato; advice on banking matters was provided by partners Dominic Newcomb and Charles Armstrong with associates Tian Sun, Hayden Teo, Jack Winfield and Christina Nasioutzik; and on real estate matters by partners Quentin Gwyer and Jeremy Trinder with associates Angus Hortop and Costa Thrasyvoulou.

The Addleshaw Goddard effort was led by Georgina Powling, commercial partner and co-head of IP, and Joe Maitland, real estate partner.

Meantime the A&O team advising on the term loan was led by leveraged finance partner Annette Kurdian and high yield partner John Kicken, supported by associates Sampada Bannurmath, Hershil Kotak and Oriana Yeung. 

The A&O team advising on the other debt financing aspects of the transaction was led by leveraged finance partners Denise Gibson and Alice Smith and high yield partner Marwa Elborai, supported by senior associates Luke Newling and Odysseas Theofanis, and associates Nicole Crockford and Lachlan Shaw.

The Skadden team advising EG has been led in London by corporate partner George Knighton and includes associates Chloe Bowskill, Stephen Lee and Natasha Evagelia (corporate); of counsel Helena Derbyshire and associate Damian Babic (labour); partner Alex Jupp and counsel Jisun Choi (tax), partner Clive Wells and associate Zoe Cooper Sutton (banking), partner James McDonald (capital markets); and in Brussels, partner Bill Batchelor (antitrust).

Asda already has 438 petrol stations, including 132 that it bought from the Co-op last year in a £600m deal that The Lawyer reported saw a Skadden team again led by Knighton called in to act as principal legal advisor to Asda. Latham advised the supermarket on bank financing, A&O on employee pension implications and UK firm Charles Russell Speechlys on the real estate components. Addleshaw Goddard served as principal legal advisor to the Co-op. 

Asda chairman, Stuart Rose, said the tie-up with EG was “all about driving growth by bringing Asda's heritage in value to even more communities and accelerating the growth of its convenience retail business”.

There are already 166 Asda ‘On the Move’ convenience stores that have been rolled out on EG sites since the Issa brothers bought the supermarket in 2021 for $6.8bn; all EG sites in the UK and Ireland will now be rebranded under the Asda name. 

Following completion of the transaction, expected in Q4 this year, Asda said it plans to invest more than £150m in the next three years to fully integrate the combined business. 

The transaction will be funded by £450m of equity provided by the shareholders, which includes US retail giant Walmart, Asda's former partner company, along with £770m of term loan debt and £1.1bn from property-related transactions.

Asda said it expected the tie-up to save it around £100m over the next three years through a combination of economies of scale, “higher volumes and cross-selling opportunities from a large and highly complementary customer base”. The company reported like-for-like sales growth of 7.8% in the three months to the end of March compared with the previous year, while total revenues excluding fuel increased by 8% to £5.0bn.

EG said it would use the proceeds from the tie-up along with net proceeds of $1.4bn from a recent sale and lease back transaction in the US to repay debt, which Reuters reported was close to $9.7bn at year end, more than seven times its adjusted earnings before interest, tax, depreciation and amortisation for 2022. EG said the group’s net leverage would fall to below five times. 

EG will continue to operate in the US, Australia and Europe and will retain around 30 UK sites as well as its Cooplands bakery business and other foodservice brands. 

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