Asda to expand convenience store empire with EG Group deal

• It also would boost Asda's efforts to chase the U.K.'s second-largest grocer, Sainsbury, which Asda was blocked from merging with in 2019.

Details: The deal includes around 350 gas stations and 1,000 convenience stores. It will be partially financed via £450 million from Asda shareholders, who also committed to invest another £150 million within three years to fully integrate the businesses.

• Both Asda and EG Group are backed by private equity firm TDR Capital and the billionaire Issa brothers.

The bottom line: Pay attention to the debt on both sides of this deal.

• Asda already had significant leverage based on TDR's 2021 buyout from Walmart (which retained a minority stake), and labor union critics are calling for a Competition and Markets Authority review of the "unsustainable" structure in light of rising interest rates.
• EG Group, meanwhile, would use the merger to delever its own balance sheet; a process it began via its recent $1.5 billion sale-leaseback of some U.S. store properties.