Blackburn-based private equity-backed billionaires Mohsin and Zuber Issa will reportedly shell out less than £800 million from their own pockets to take a controlling stake in supermarket Asda, a mere fraction of its £6.8 billion valuation. In what is touted to be the UK's biggest leveraged buyout in over a decade, the Issa brothers along with private equity firm TDR Capital are in the works to buy the supermarket chain.
Reports reveal, they have arranged an intricate series of asset disposals and debt deals to fund the buyout. Financial Times stated an estimated £165 million worth of fees will be paid to the lawyers, bankers and other advisers on the deal. The Issa brothers and TDR are reportedly funding most of the deal's £6.5 billion cash consideration by loading up Asda with £3.7 billion of junk-rated debt, which will be sold to loan and bond investors this month. The supermarket's previous owner Walmart will retain a minority stake in the business, cutting £500 million off the new owners' registry.
The buyers will also raise a further £1.7 billion by disposing of some of Asda's assets, with sale and leasebacks planned for its distribution centres. Its petrol stations are being sold to EG Group. This leaves just £780 million for them to fund from their own pockets.
The brothers released a statement last week saying they were “putting in place a robust capital structure” for the grocer and were “confident that external investors will share our belief in Asda's strong fundamentals and exciting future prospects.”
