Asda has reached an agreement to buy 132 petrol forecourt sites from the Co-op in a deal set to be worth around £600m.
The deal has a cash value of £438m and includes IFRS16 lease liabilities of approximately £162m. Asda said the final amount paid will be known on completion of the deal in Q4 of this year. The purchase is subject to normal conditions with the CMA expected to look at it and it will be financed through a combination of existing cash resources and bank finance.
The estate comprises 129 established sites across the UK with grocery stores of between 1,500 sq ft and 3,000 sq ft along with attached petrol filling stations and three development sites. Asda said the deal will help create a new and distinct format for Asda in the convenience market.
All 2,300 Co-op colleagues impacted by the deal will transfer to Asda under Tupe rules.
Asda said the stores delivered net sales of £863m and pro forma EBITDA of £53m for 12 months to June 2022, with potential to grow EBITDA further when development opportunities and other synergies are taken into account.
“We have always been clear in our ambition to grow Asda and are hugely excited to create this new and distinct part of our business, giving us the opportunity to bring Asda value in fuel and groceries to even more customers and communities across the UK,” said Asda co-owner Mohsin Issa.
“We see convenience as a significant growth opportunity for the business. This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second largest supermarket. We look forward to welcoming the Co-op colleagues to this new part of our business after we complete the transaction and due processes in the coming months.”
Co-op said the stores included in the deal represented 5% of its 2,564 stores and that forecourts were a “relatively small non-core” part of its offer.
The society said it would use the proceeds from the sale to reinvest into its core convenience business as well as growing its wholesale, franchise and e-commerce operations including new convenience stores.
It said it will also use the money to invest in pricing, store operations, technology, and logistics as well as reducing its net debt.
Figures from its latest set of annual accounts show the Co-op ended 2021 with net debt of £920m compared with £695m coming out of the 2019 financial year. The Grocer reported in July that the Co-op is to slash spending on change and transformation projects in 2023 by £47m as part of cost-cutting measures that have prompted a round of redundancies at its head office.
“This transaction is in line with our strategy to move away from operating petrol forecourts and supports our vision of co-operating for a fairer world while building our core leading convenience business,” said Co-op chief executive Shirine Khoury-Haq.
“I would like to thank our incredible colleagues in these stores, and we will work closely with Asda to ensure a smooth transition.”
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