8th Dec 2020 13:38
(Alliance News) - The UK competition regulator said Tuesday it will look into US retailer Walmart Inc's sale of supermarket Asda.
At the start of October, Walmart has agreed to sell Asda to Issa Brothers and UK-based private equity firm TDR Capital LLP for GBP6.8 billion.
Brothers Mohsin and Zuber Issa are co-chief executives of Blackburn-based British retailer EG Group, a company which operates fast food outlets and petrol stations in Europe, Australia and the US.
On Tuesday, the Competition & Markets Authority said it will consider if the deal will result in a "substantial lessening of competition within any market or markets in the UK for goods or services".
The UK watchdog said it opened the Phase 1 investigation following the European Commission’s decision to refer the case to the UK.
The CMA's current statutory deadline to announce its decision is February 18.
Walmart has previously stated that Asda will be sold for USD6.8 billion, adding that the Issa brothers and TDR will have equal shareholdings in the grocer. Walmart also highlighted that Roger Burnley will stay on as chief executive, leading a board which will have representatives appointed by the Issa brothers, TDR Capital and Walmart.
Walmart noted that as well as accelerating Asda's existing strategy, the Issa brothers will bring "significant additional expertise", drawing on their experience of building a global convenience retailer with more than 6,000 sites.
Walmart believes the brothers are "well-placed to support Asda in developing a compelling convenience retail proposition and taking it to market, and to advise on the development of strategic brand partnerships that will better enable Asda to address multiple consumer missions".
Under the new owners, the business is expected to invest over GBP1 billion in the next three years in Asda, with the amount to be used to strengthen its supply chain. Walmart noted that based on the current deal terms, it expects to recognize a non-cash loss of around USD2.5 billion after tax in financial 2021.
The US retailer was forced to put Asda back on the market after a merger with J Sainsbury PLC was blocked last year by the UK Competition & Markets Authority, with the regulator finding the merger would leave customers worse off.
The transaction is expected to complete in the first half of 2021.
Shares in Walmart were down 0.3% in New York in pre-market trading on Tuesday at USD147.70.
Earlier Tuesday, research agency Kantar said UK demand for groceries has surged in November, amid limited opportunities to drink in pubs and restaurants.
UK take-home grocery sales rose 11% in the 12 weeks to November 29, to total GBP27.67 billion, the fastest rate of growth since August. In the most recent four weeks sales increased by 14% - as eating and drinking out of home was restricted by the English national lockdown, noted Kantar.
Wm Morrison Supermarkets PLC led the 'Big Four' grocers, with sales increasing both in store and online, resulting in growth of 14%, and gaining 0.2 percentage points of market share to stand at 10.3%.
J Sainsbury's share remained steady at 15.7%, with sales up by 11% in the latest 12 weeks. Tesco PLC's sales rose by 10%, and Asda's by 7.7%.
By Paul McGowan; [email protected]
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