Asda purchases 132 Co-op petrol station sites in £600m deal amid bid to become UK’s second biggest supermarket

Asda is to buy 132 Co-op petrol station sites in a deal worth £600 million.

The move will see the UK’s third-biggest supermarket chain grow its presence in the convenience retail sector.

Meanwhile, Co-op said the deal would help to beef up its finances in the face of economic uncertainty.

The UK is currently in the midst of a major cost of living crisis which has so far seen record inflation, soaring interest rates and forecasts of a recession.

Asda spies ‘significant growth’ opportunity

Asda is set to shell out £438 million in cash to Co-op and take on roughly £162 million of lease liabilities as part of the deal.

The final amount will be confirmed when the deal is completed later this year.

129 petrol station forecourts and three development sites are included in the transaction.

Around 2,300 Co-op workers employed at the stores in question will transfer over to Asda.

It marks a continued move away from Asda’s former business model, which centred almost entirely on large, out-of-town retail sites rather than smaller city centre and petrol forecourt stores.

“We see convenience as a significant growth opportunity for the business,” said Mohsin Issa, the co-owner of Asda, who was reacting to the news.

“This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second largest supermarket.”

The retailer has made several major plays in recent months, with the introduction of a new loyalty scheme for consumers, and the rebrand of its value range.

Mr Issa, along with his brother Zuber and private equity firm TDR Capital, bought Asda off US retail giant Walmart in 2021.

The Blackburn billionaires made their money through their petrol station operating company EG Group, which is one of Europe’s largest independent fuel retail chains.

After the Issas’ acquisition of Asda, the Competitions and Market Authority (CMA) raised concerns that forced them to sell 27 of Asda’s forecourts in order to complete their takeover of the supermarket.

EG Group is not reported to have any involvement in this latest deal, which does not require approval from the CMA.

However, a spokesperson for Asda said it would be happy to work with the regulator should it choose to investigate.

“We fully respect the obligations of the CMA to conduct their work and will of course co-operate with them,” they said.

“We will let the CMA conduct their work and stand ready to co-operate as necessary.”

Co-op sell-off provides financial ‘buffer’

For Co-op, the sell-off presents an opportunity to beef up its finances in the midst of a challenging economic picture.

“Today’s sale will help us to reduce our net debt and improve our financial position, giving us more of a buffer to ride out the current economic waves,” explained newly-appointed CEO of Co-op Group Shirine Khoury-Haq.

“If we have learned anything over the past couple of years, it is that we cannot predict much in terms of what is coming next.

“We are incredibly optimistic about the future of the business, but we do need to look prudently at the external environment.”

Ms Khoury-Haq added that the deal would reduce Co-op’s entire retail estate by 5%, with the money raised set to go towards investment in existing stores and employees, as well as the expansion of its convenience store portfolio.

It comes amid a turbulent period for the retailer.

In April 2022, the Co-op Group - which also has a funeral care division - revealed its annual profits had halved as a result of supply chain disruption and inflation.

This led it to cut around 400 head office roles.

It has also offloaded several divisions over the last decade, including its pharmacy and travel shops.

Ms Khoury-Haq said there were no plans to sell off any more of Co-op’s assets.

Additional reporting by PA