Asda Steps On The Gas As It Targets Co-Op Forecourt Retail Division

U.K. supermarket group Asda is preparing a $530 million swoop on rival the Co-op Group’s gas station forecourt business.

The move will accelerate the retailer’s long-anticipated move into Britain’s convenience store market.

Local reports contend that Asda is the leading player in the bid to buy the Co-op’s gas retailing arm, which includes a substantial convenience operation.

It is believed that a deal could be struck as soon as this week, although parties other than the formerly WalmartWMT
-owned Asda remain interested in the Co-op assets.

Asda has a fledgling convenience format called Asda on the Move, but it is far smaller than those of big four rivals Tesco and Sainsbury’s, which have huge national c-store estates.

However, if Asda does win the auction for Co-op, it would significantly boost the privately-owned supermarket chain’s market presence in convenience retailing and fast-track its ambitions in this lucrative sector.

In March this year, Asda opened its largest Asda On the Move store to date, a 5,000 sq ft location in the East Midlands, taking the total to 32 stores at the time, with the longer-term objective of launching stores across EG’s U.K. forecourts.

EG Group-owned Cooplands, the U.K.’s second largest bakery chain, has also opened a café inside the store, and Oliver Silvester, head of Asda On the Move, said: “The launch of our largest ever Asda On the Move with EG Group marks an important step in Asda’s commitment to ensure more customers have greater access to our extensive range of value products and services – whether on the move, online, in-store, or via click & collect.

“Our partnership with EG Group makes this possible and combines our expertise in food retail with EG’s roster of innovative and well-known food service brands. It’s fantastic to see our biggest Asda On the Move to date launch in Retford.”

Asda Targets Gas Station Sites

People close to the Co-op sale process confirmed to broadcaster Sky News that it is Asda rather than the billionaire Issa brothers’ company EG Group that is in talks to acquire the assets.

Over recent weeks Co-op has been working with bankers at Rothschild to explore the potential for a sale of its estate of around 130 gas station forecourt sites, with the proceeds from the sale to be used to pay down the company’s debt levels and to strengthen its balance sheet.

The sale will also provide capital to invest in digital capabilities across other areas in which it operates, according to analysts.

News of the prospective sale comes just days after the Co-op announced the appointment of Shirine Khoury-Haq as its first female chief executive.

The group, which is best-known for its supermarkets and funeral service care, is attempting to reduce its borrowings at a time when inflationary pressures and a deteriorating economic backdrop are threatening its profitability.

If the sale of the gas station retailing arm goes ahead, it will be the latest in a series of divisions to have been offloaded by the Co-op over the last decade.

It previously disposed of its chain of pharmacies and travel stores, while it is no longer a shareholder in the Co-operative Bank following a number of crises which almost led to its collapse.

Gas Stations Bid Stalled

Other gas station retailers have also explored sale processes in recent months, although a $4.7 billion auction of Motor Fuel Group (MFG) is unlikely to move ahead for the time being because of the state of the debt finance markets.

Owner Clayton Dubilier & Rice (CD&R) will only proceed with a sale if it can secure an attractive valuation and despite a number of high profile suitors, no deal has yet been inked.

MFG has grown through a series of acquisitions to become the largest independent player in the sector, behind energy giants BP and Shell.

A merger of its assets with supermarket chain Morrisons’ gas stations was mooted by City analysts at the time of the latter’s takeover by CD&R, but the prospect of that transaction receded after a $880 million deal for EG Group to buy Asda’s forecourt gas stations was abandoned in October last year.

Asda and EG Group are both controlled by TDR Capital and the latter’s founders, Mohsin and Zuber Issa, while CD&R has owned MFG since 2015.