Walmart to sell majority stake in Asda for $8.8 billion

Walmart announced early Friday (Oct. 2) a deal to sell a majority interest in its British-based grocery retailer Asda has been reached. Brothers and British billionaires Zuber and Mohsin Issa and private equity firm TDR Capital will acquire a majority stake for $8.8 billion (U.S).

The deal is subject to regulatory approval and expected to close in the first half of 2021. Walmart will garner a $2.5 billion loss on the deal in fiscal 2021 and expects earnings will be dinged 25 cents per share in the first full year following the transaction.

“I’m delighted that Walmart will retain a significant financial stake, a board seat, and will continue as a strategic partner. Asda has been a powerhouse of innovation for the rest of the Walmart world, and we look forward to continuing to learn from them in the future. This important combination will continue to keep customers and colleagues at Asda’s heart, which is important to us all,” said Judith McKenna, CEO of Walmart International and a former Asda employee.

Roger Burnley will continue to work as Asda CEO, and the deal will include a $1.29 billion (U.S.) cash injection over the next years to help strengthen the business and its supply chain. Asda will remain headquartered in Leeds.

“This new ownership opens an exciting new chapter in Asda’s long heritage of delivering great value for UK shoppers. With our combined investment, expertise and ambition; Asda, Walmart, the Issa brothers and TDR have an incredible opportunity to accelerate our existing strategy and develop an even more exciting offer for our customers as well as strengthen our business for our colleagues,” Burnley stated in the release.

The Issa brothers, who are the founders and co-CEOs of EG Group, a global convenience store, said they had been admirers of Asda for many years.

“Asda’s customer-centric philosophy, focus on operational excellence and commitment to the communities in which it operates are the same values that we have built EG Group on. Asda’s performance through the Covid-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth,” the brothers noted in a statement.

The Asda business has been an underperformer for Walmart in recent years, as deep discounters Aldi and Lidl expanded their footprints across the United Kingdom. While Walmart is garnering about $2.3 billion less than it paid for Asda in 1999, the company was a talent pipeline for Walmart.

McKenna was plucked from Asda by former U.S. CEO Greg Foran to help get the Walmart U.S. business back on track. She worked to set up employee academies and ramp up training across the massive U.S. business. She also provided insights into online grocery because Asda has had the service for more than 20 years.

Tom Ward, an executive in Walmart U.S., also hopped across the pond to work within central operations of Walmart Neighborhood Markets as the retailer began to roll out more of the stores. He later helped McKenna with the employee academy programming and was then moved to digital operations overseeing last mile and online grocery delivery.  In 2020, he was promoted to senior vice present of customer product, online grocery and last mile.

Scott Benedict, director of retail studies at Texas A&M University, said Asda has been a talent pipeline, but also delivered a wealth of insights for Walmart over the past 21 years. He said as the retail landscape continues to change it makes business sense for Walmart to invest more in technology and markets positioned for growth like China and India. Benedict said Asda has also been a great asset for Walmart to own and he’s happy to see the retail giant is retaining a board seat and minority interest.