The success of the bid by Mohsin and Zuber Issa and their private equity partner TDR Capital returns the 71-year-old firm to UK ownership after 21 years. ASDA was originally founded in 1949 by the Asquith family when it merged its retail business with Associated Dairies in Yorkshire.

Now the Blackburn based Issa brothers and TDR Capital are acquiring a majority ownership stake in Asda. Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board.

The brothers have a successful background in convenience retailing and last month, ASDA announced plans for a new convenience wing called ‘Asda on the move’.

Iconic

In a statement Mohsin and Zuber Issa said: “We are very proud to be investing in Asda, an iconic British business that we have admired for many years. Asda’s customer-centric philosophy, focus on operational excellence and commitment to the communities in which it operates are the same values that we have built EG Group on. Asda’s performance through the Covid-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth”.

Convenience

“We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy. After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK.”

The deal, worth almost £7 billion which is subject to approval from the Competition and Markets Authority. A previous merger of Sainsburys and ASDA was blocked in 2019 by the CMA.

The Issa brothers started their business empire cleaning toilets in their parents petrol station. They had an idea to transform the filling station into a “shopping destination”.

Their petrol station empire has since expanded to nearly 6,000 forecourts across 10 countries. It has turned the brothers into billionaires and gave them leverage to take control of the vast Asda supermarket chain.

In their teens, the brothers recognised there was little profit to be made from just selling fuel, but that on the forecourt they had a captive market of motorists with little to choose from beyond sweets, crisps and sandwiches.

Timing

The brothers, now 48 and 49, saved £150,000 which allowed them to buy their own forecourt in Bury, Greater Manchester, to test their idea of offering a wide range of fresh food and snacks.

Their timing was perfect, with the big oil companies trying to offload their forecourts. The brothers took on more petrol stations and installed branches of Spar, Carrefour and other supermarket chains alongside Subway outlets, Burger King, Greggs and KFC. In 2010, the brothers’ EG Group opened the UK’s first Starbucks drive-through. They now operate 110 Starbucks stores, and are the largest franchise operator of KFC in the UK, with 125 outlets.

Asda currently employs around 4,000 staff in Northern Ireland across 17 stores, including an Asda Living store in Belfast city centre.

Last month, NR ran a story regarding ASDA’s plans to enter the convenience market through a trial with forecourt operator EG Group it was announced on September 21. Asda will brand its convenience wing as ‘Asda On the Move’.

The post Forecourt owners take over ASDA first appeared on Neighbourhood Retailer.

The Whitbread Group, who own Costa, today announced that it has entered into an agreement for the sale of Costa Limited. The sale represents an enterprise value of £3.8bn at completion, after adjusting for estimated transaction costs and separation costs, demonstrating a multiple of 16.4x Costa within 2018.

The transition period is expected to be 12-24 months, with Dominic Paul remaining Costa Managing Director and no other changes to the Whitbread executive team.

It has also been reported that transaction and separation costs of approximately £100m, with the appropriate routes to return proceeds considered at completion. However, some pension trustees and some debt providers will require consultation.

In the proposed sale of Costa document there have been several noticeable features including a nod to the brand recognition that Costa holds, giving them strength, multi-channel presence and international growth potential.

The transaction was unanimously agreed by Whitbread Board to be in the best interests of shareholders net cash proceeds intended to be returned to shareholders.

The sale appears to come at a time of financial instability for Costa, with them stating that a significant majority of net cash proceeds intend to be returned to shareholders.

Whitbread also explained the deal will reduce financial indebtedness and make a contribution to the pension fund, which will both provide headroom for further expansion of Premier Inn in the UK and Germany.

This comes as no surprise as, currently, Whitbread have 75,000 rooms in almost 800 hotels in the UK, Germany and the Middle East, operating under the Premier Inn brand.

Coupled with its 49 percent investment in Pure, a London-based healthy eating quick service restaurant business with 15 stores, they are focusing their business efforts in what they believe are more viable options.

Alison Brittain, Whitbread chief executive, spoke about the deal with optimism that the Coca-Cola brand would be able to take them into a new era. She stated that:

“The announcement today represents a substantial premium to the value that would have been created through the demerger of the business and we expect to return a significant majority of net proceeds to shareholders.”

Alison went on to speak about how this deal would help the business financially and which will provide additional headroom for the expansion of Premier Inn.

The chief executive spoke about the 267 year history of Whitbread, which saw them acquire Costa for £19m in 1995 and saw it expand to the coffee giant it is today. This development of the brand means that Alison would appear to have no regrets about the sale.

Coca-Cola’s global scale, product and distribution capabilities have been seen as an advantage and a way to continually improve the Costa brand, with Alison stating: “This combination will ensure new product development, continued growth in the UK and more rapid expansion overseas.”

When looking at this from a Coca-Cola perspective, this is a way for the drink company to finally corner the hot beverage market.

James Quincey, Coca-Cola president and CEO, commented that, “Hot beverages are one of the few remaining segments of the total beverage landscape where Coca-Cola does not have a global brand. Costa gives us access to this market through a strong coffee platform.”

Coffee is one of the fastest-growing beverage categories in the world, at 6 percent, so the decision to integrate into the market now is logical from Coca-Cola.

James went on to state that “So, Coca-Cola and Costa have remarkably complementary businesses. Costa offers Coca-Cola the best opportunities to create value in coffee. We can be better together.

This is not an acquisition where we’re looking for places to save costs in the business. We’re buying Costa to grow the business and our participation in the category.”

This deal, financially, and in terms of progression, makes sense for all parties involved. Costa are maintaining the loyalty to their stakeholders and employees through what appears to be a financial bump.

This is also a logical step for Coca-Cola in being finally able to be forefront of the hot beverage market throughout the UK, with an already established brand.

View Costa Infographic (PDF)

The post Cola-Costa takeover to cost £3.9bn first appeared on Neighbourhood Retailer.

In a shake up to the bakery industry throughout NI McErlain’s Bakery, who experienced trading difficulties in the past year, called in Andrew Dolliver and Luke Charleton of EY as administrators to the company.

This may seem like a detrimental time for the Genesis Craft Bakery, but all parties involved are optimistic for the future of the brand under new leadership, and thankful for minimal damage to the occupation and economic factors.

M&S, Tesco, Waitrose and Brake confirmed that their contracts will continue as normal and Genesis Crafty will continue trading from the plant for the meantime.

However, the news may come as a shock to many throughout the industry, due to Genesis Crafty creating 47 new jobs last September, investing £6m on new equipment and having further investment from Invest NI of £485,000.

Ernst and Young LLP explained that these issues came from a period of trading difficulties, but are yet to comment on what sent the bakery into liquidation. They approached Paul Allen to invest in the company and save both the brand and jobs.

We are still awaiting comment on EY about the overall affect this will have on current creditors involved with McErlain’s Bakery and the Genesis Crafty range.

Andrew Dolliver of Ernst and Young LLP, also explained that their priority lay with McErlain’s and they aimed to “achieve a better result for the company’s creditors as a whole and to identify a buyer who would bring the business back to a position of stability where it could continue to trade, and importantly, where its employees were protected.”

He also expressed great hope for the future due to the success and experiences that Paul Allen has accumulated throughout his career in the retail sector.

Paul spoke about the matter with confidence for substantial, managed, successful growth: “I’m hoping that in my non-executive role with the company, I will be able to use my experience in the industry to help guide the growth of both the Genesis Crafty brand and the overall business.”

Paul went on to speak about the fact that this deal was also sentimental, due to it being “a private investment by me and my family.” He praised the McErlain family, stating they “have built a great business, with excellent products.”

Not only was the chief executive happy to save a family business, he was delighted to be saving the jobs of somewhat 260 employees: “I’m delighted that the jobs at the factory have been secured and that Brian McErlain will be staying on as managing director.”

Paul has said that he will be implementing the same kinds of strategies he has been using throughout his business career. He hopes to assist strategic growth in the mid term but the initial priority is to stabilise the business and work with staff, customers and suppliers to do just that.

The move will see five of the six McErlain brothers, who have been running the bakery for the family, leaving following Mr Allen’s purchase.

Hopeful to turn the business around, Paul alluded to what their business model will look like going forwarding, it would appear the Tayto boss is set to implement a model that brings the success of his crisp and snack brand.

Brian McErlain, commented: “This is obviously a time of mixed emotions; sadness that it is now a different family who own the business but hope for the future and the growth of the Genesis Crafty brand.

Paul Allen’s ability is very well respected in the business community, not just in Northern Ireland but further afield and I believe that his involvement will be a real benefit to the company. I’d like to pay tribute to all our staff, customers and suppliers, who have been through some difficult times with us and whose support we have really appreciated.”

This move had many within the industry commenting, including Glyn Roberts, chief executive of Retail NI, who has a special connection to the bakery: “This is very welcome news. Genesis Crafty is a long standing member of Retail NI and enjoys an excellent relationship with the independent retail sector in Northern Ireland. I have no doubt that the business will have a very secure future with its new owner.”

Whilst it is uncertain how this will play out and who will be affected overall, Paul Allen, and others, would appear to be confident in his abilities in being able to turn the company around.

The post Tayto CEO Buys Genesis Crafty Bakery first appeared on Neighbourhood Retailer.