There has been renewed scrutiny on the operations of Blackburn based Issa Brothers after their acquisition of Asda. More so, following Deloitte’s sudden resignation as auditor of the Euro Garages (EG) Group’s. According to the Financial Times the auditing firm is concerned “over its governance and internal controls”. While Deloitte is reported to audit the firm’s Australian business, the UK books will now be audited by KPMG it is believed.
But beyond that industrialists have raised question marks over how Zubin and Mohsin brothers plan to see through what is considered to be the most ambitious UK grocery deal in decades for which EG had partnered with TDR, a private equity firm.
Media reports have cautioned that the financing structure of the deal has still not been finalised and is subject to change over time. At present the buyers have not made any public announcements or even been on a call with EG’s debt investors. There is no public information on how the “petrol pump” brothers who were recently honoured in the Queen’s birthday list plan to finance the supermarket bid. It is understood that EG is not a party to the Asda acquisition. But its investors have questions about what such a large deal by the company's owners could mean for them. According to The Times, the brothers are using their petrol pump sites as collateral to secure the debt for the Asda deal.
Reports note that EG currently employs 44,000 people and is generating €20bn of revenues but financial experts have raised concerns over the company’s board which has no external members and includes only the two brothers and two TDR executives. In the meantime, The Times has reported that EG’s €417m of operating profits last year fell short of the €472m of financing costs. EG’s tax bill has been reduced to £55m over a five-year period, even as it recorded underlying earnings worth £368m in the third quarter despite a near-20% drop in the amount of petrol it sold.
Mohsin and Zuber’s father arrived in the UK from Gujarat, India in the 1970s to work in the textile industry. The brothers borrowed from family and friends to buy their own station on the outskirts of Bury in 2001 for £150,000, and according to the latest Sunday Times Rich List have accumulated a fortune of £3.6bn.
