Asda pledges to cut prices as it plans to raise funds

ASDA, owned by billionaire brothers Mohsin and Zuber Issa, has pledged to reduce prices for customers by generating up to £412 million to alleviate the debt burden of its petrol station empire.

Following a £2 billion acquisition deal of EG Group's UK and Ireland operations, Asda aims to extend its reduced pricing to "hundreds more communities", reported The Telegraph.

The group will use the proceeds from the acquisition to pay down some of EG Group's loans, scheduled for repayment by 2025. Additionally, EG Group plans to raise funds through a loan, integrated into existing terms, with repayments due by February 2028.

According to the report, EG Group's debt was approximately $9.6bn (£7.9bn) by the end of 2022. With the latest refinancing, they aim to trim this debt to $4.2bn (£3.5bn), following an earlier reduction from a sale and leaseback deal in the US earlier this year.

Mohsin Issa, co-owner of Asda, said, “This is a great day for Asda and for millions of UK consumers. Asda is a much-loved brand that is instantly recognised for great value. I could not be more proud or excited that the iconic Asda sign is now coming to hundreds more communities. I’d also like to welcome our new colleagues from EG UK who have joined the Asda family today.”

Meanwhile, ASDA has confirmed it will open 356 new Asda Express petrol station convenience stores – with new shops coming in the next few weeks.

Stores will be opening across the UK, with 310 set to open in England, 24 in Scotland and 22 in Wales.

The Asda Express sites will stock up to 3,000 branded and own-label products including ‘top-up’ shops for essential items such as milk and bread, grabbing lunch on the go or cooking dinner from scratch.

Asda acquired 119 convenience sites with attached petrol stations from the Co-op Group last year. Asda has already converted 39 of these sites to Asda Express and expects to complete the rest by the end of March 2024.

With the rollout of both acquisitions and Asda’s three stand-alone Express sites, the retailer is now the owner of a total of 478 convenience stores. In the coming months, Asda has plans to roll out further standalone Express stores in locations such as Romford Station and Manchester Oxford Road and is committed to opening 300 stand-alone sites by the end of 2026.

Asda’s acceleration into the convenience market is part of the retailer’s long-term strategy to become the UK’s second-largest supermarket, by moving into the fast-growing convenience market worth £40bn per year.

The EG Group deal will also see Asda grow its presence in the £64bn foodservice market, as around 462 Greggs, Burger King and Subway outlets located on the EG Group sites will be transferred over to Asda as part of a franchise agreement.

Lord Stuart Rose, who is chairman of both EG Group and Asda, said: “The transaction is an important milestone for both companies.

“EG Group can focus on international growth underpinned by its strengthened balance sheet, whilst Asda can accelerate its convenience roll-out on proven, well-invested sites.

“As families continue to face into cost-of-living challenges, bringing Asda’s long-standing value in groceries and fuel to even more communities is a win for UK consumers.”

Asda also owns the fast food chain Leon, which it will also look to introduce to its stores.