Asda raises almost £600m from supermarket sell-off
Asda has raised close to £600m from three deals for its supermarkets ahead of a looming debt repayment to previous owner Walmart.
The grocery giant struck sale-and-leaseback deals for its supermarkets totalling £568m, according to the FT.
It raised £467m in two deals with New York-based asset manager Blue Owl and London-listed Supermarket Income REIT to sell and lease back 20 stores and a depot in Lutterworth, Leicestershire.
The deals saw 10 of the stores acquired through a joint venture with Blue Owl and Supermarket Income REIT, while another 10 were acquired by Blue Owl alone.
A separate deal to offload four supermarkets in Birmingham, Greater London, Coventry and Leeds to investment managers DTZ raised £101m, sources told the FT.
Asda intends to use the proceeds of the two deals to repay a debt to Walmart, which retained a 10 per cent stake in the company following the £6.8bn sale to TDR and the billionaire Issa brothers in 2021.
The structure of the buyout left Asda owing Walmart so-called payment-in-kind interest, which is rolled up and added to the principal due. When the investment matures in 2028, Asda could owe Walmart £900m.
Asda was seeking to settle the debt next year, as the rate of interest rises approaching the payment date, according to the FT.
The latest deals leave Asda owning or holding 60 per cent of its store estate on long leases, comparable to levels of freehold ownership at rivals Tesco and Sainsbury’s.
Former boss Allan Leighton re-joined Asda earlier this year in a bid to boost the struggling grocer’s fortunes; the supermarket giant has undergone numerous leadership changes, IT issues, and sales woes in the last few years.
Leighton’s talk of a ‘war chest’ to spend on price cuts earlier this year sent listed grocer’s share prices tumbling and prompted Tesco to set aside millions for price cuts in its annual results.
However, its market share has continued to decline this year, falling behind rivals Tesco and Sainsbury’s and leaving its place in the UK’s supermarket chain open to threats from Aldi and Lidl.
CityAM has contacted Asda, Blue Owl and DTZ for comment.