logo-loader
viewWalmart Inc

US private equity giant KKR weighing up bid for Walmart-owned Asda

Speculation that Walmart will look to sell its UK arm to a private equity house has been rife following last week’s report from the UK competition regulator, which effectively killed Asda’s merger with Sainsbury’s

Asda
Walmart bought Asda for £6.7bn back in 1999

US private equity giant KKR is mulling a bid for Asda – the Walmart-owned chain whose proposed merger with fellow UK supermarket J Sainsbury PLC (LON:SBRY) was thrown into doubt last week.

KKR, which has previously struck deals to buy out Toys R Us and Alliance Boots, is said to be working with former Asda boss Tony De Nunzio, according to the Sunday Times, who is one of its senior advisers.

READ: Sainsbury’s plunges as regulator hints at blocking Asda merger

Should the rumoured takeover materialise, De Nunzio is thought to be top of the list to take over as KKR’s chairman.

Last Wednesday, the UK’s competition regulator effectively killed off the £10bn tie-up after an in-depth investigation found “extensive competition concerns”, such as higher food and petrol prices, should it go ahead.

To make things worse, the Competition and Markets Authority concluded that, regardless of any remedies suggested by Sainsbury’s and Asda, “it is likely to be difficult for the companies to address the concerns it has identified”.

Walmart still wants a stake in Asda

The damning report sent shockwaves through the Square Mile and triggered speculation that Walmart, with its focus firmly on its fight with Amazon, would look to offload Asda to a private equity buyer.

Sources quoted by the Sunday Times said any deal would have to be structured so that Walmart retained a “significant minority holding”, limiting the potential price tag and allowing Asda to retina the benefit of its parent’s buying power.

The Sainsbury’s merger valued Asda at just over £7bn, but the chain would be expected to fetch less in a listing or sale because there would not be the same economies of scale.

Asda’s sales are picking back up

Asda has been a lucrative investment for Walmart since it was bought for £6.7bn back in 1999.

The US retail titan has paid itself billions of pounds in dividends, while it has also recruited some of its top executives for big jobs across the pond

After years of sluggish trading, brought on by the rise of German discounters Aldi and Lidl, Asda has found its groove again of late.

With its title as Britain’s cheapest supermarket under threat, Walmart bosses have poured money into price cuts, which has helped Asda report seven quarters of like-for-like sales growth on the bounce.

The move has come at a cost though, with profits falling by more than a fifth to £379mln in 2017.

Quick facts: Walmart Inc

Price: 120.25 USD

NYSE:WMT
Market: NYSE
Market Cap: $341.83 billion
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Redx Pharma's chief scientific officer talks grant funding for its fibrosis...

Redx Pharma PLC's (LON:REDX) chief scientific officer Dr Richard Armer speaks to Proactive London's Andrew Scott after announcing they'd won grant funding for their latest project. They're collaborating with the Medicines Discovery Catapult, a government body that helps accelerate the...

36 minutes ago

3 min read