So, rumours about an Asda IPO are true. Addressing 1,200 staff at its Leeds HQ, CEO Roger Burnley urged staff to forget about plan A or plan B and focus on the day job. Trouble is, Walmart International CEO Judith McKenna let the plan B cat out the bag, admitting it was “seriously considering” a separate listing for Asda once again.
It’s a tantalising prospect. A partial sale would still give Asda access to Walmart’s buying power, and tech expertise, whilst raising a tidy sum for Walmart to invest in other projects. The annual dividend would be lower, but so would the risk.
Walmart is no stranger to such an arrangement. Walmart Mexico is on the Mexican Stock Exchange. An IPO would also free Asda up to pursue its own strategy, as Walmart Mexico has, developing multiple fascias and successfully expanding into Central America. And perhaps this arrangement would stop Walmart from pinching Asda’s best talent.
Even if the prospect of Tony de Nunzio running Asda again via a KKR bid has got tongues wagging, an IPO surely has to be a better option than a PE deal. As well as needing access to Walmart’s buying power, private equity would target an exit. An IPO cuts to the chase - and Walmart pockets the difference.
The other option is a trade deal, but it would be a very big stretch for B&M, the only viable UK player, to do a deal in reverse. And in terms of international buyers, no one seems to be in the market for a £22bn-sales UK supermarket these days, except possibly Amazon, and Walmart would surely not accept a bid from them. Besides, it’s not a great fit for Amazon. Current form suggests Amazon’s interest in physical stores is either upmarket chains (Whole Foods) or convenience stores in city centre locations.
Of course there are still huge question marks over a successful float. Quite apart from the timing issue (McKenna said it would take “years”), how much appetite will investors have given the uncertainty around legacy bricks & mortar retailers? How would it grow when Aldi and Lidl have stolen its crown? Burnley urged staff to “think big, start small, learn and scale fast”. But there’s nothing quite like an IPO to win hearts and minds. To list Asda once again on the UK Stock Exchange would have a very galvanizing effect and generate a lot of pride among Asda colleagues and store management teams - in a way that the Sainsbury’s merger could never have done.