Dive Brief:
- Walmart announced Friday that it has agreed to sell a majority stake in its Asda supermarket business in the U.K. to an investment group that includes private equity firm TDR Capital and Issa brothers, the owners of convenience store chain EG Group.
- The deal, which values Asda at $8.8 billion, allows Walmart to retain an ongoing commercial relationship and a seat on the company’s board. Walmart said in a regulatory filing that it will incur a non-cash loss of approximately $2.5 billion, after tax, in fiscal year 2021 and that the divestment will cut its earnings per share by 25 cents in the first year after the closure of the deal, which is expected in the first half of fiscal 2022.
- Exiting investments in Asda along with its other international businesses allows Walmart to focus on its digital growth in the U.S.
Dive Insight:
Completing the Asda sale has been a long and bumpy road for Walmart, but doing so pulls it back from a messy U.K. grocery battle and gives it more ammunition to pour into its U.S. stores and online investments.
Walmart had to halt the sale process earlier this year as the coronavirus pandemic upended operations across the globe, with negotiations resuming mid-summer with a select group of interested parties. Last year, British regulators blocked the sale of Asda to competitor Sainsbury’s, saying the deal would have resulted in higher prices and a “poorer shopping experience” for customers.
According to reports, this latest deal is expected to be approved because the acquiring parties do not own stake in a major grocer.
One of the U.K.’s largest food retailers, Asda has been battling discount competitors Aldi and Lidl, which have undercut it on price and offered a simpler shopping experience that many European consumers find compelling. Asda has expanded its e-commerce services and lowered prices in response. By holding an ongoing stake, Walmart stands to learn from Asda’s ongoing evolution as Aldi and Lidl ramp up U.S. expansion plans.
Walmart sold off the majority of its stores in Brazil in 2018 and this summer agreed to sell its stores in India to Flipkart, the e-commerce company in which it owns a majority stake.
In the U.S., Walmart recently launched its Walmart+ membership program, which has already been adopted by 11% of shoppers, according to one survey. It also announced a refreshed supercenter design that encourages shoppers to navigate stores and checkout with the Walmart app.
Walmart is also currently partnering with Oracle to purchase a 20% stake in the social media app TikTok.
In its Friday announcement, Walmart said EG Group’s ownership brings significant experience in convenience retailing and brand partnerships to the table. Asda, which will retain CEO Roger Burnley, also plans to continue investing in online services.
