Walmart closing in on Asda sale

American retail giant Walmart is closing in on a sale of UK supermarket chain Asda, with three private equity firms reportedly proceeding to the next round of bidding.

Apollo Global Management, Lone Star Funds and TDR Capital (which is reportedly working with EG Group on its bid) have all submitted first round offers for Asda and have been invited to the next bidding stage, with a deal potentially valuing the business at over £7 billion.

There have been suggestions that concerns over market volatility as a result of the coronavirus outbreak will hurt suitors’ access to cheap financing, but no final decisions have yet been made.

Walmart has also said the sale will proceed despite tightening credit threatening to hamper debt-fuelled deal making.

A source close to the talks has said that Walmart would maintain a significant minority stake through whatever deal is struck.

Last year, a proposed £7.3 billion deal to merge Asda with rival supermarket chain J Sainsbury was blocked by UK antitrust authorities who argued it would lead to higher prices and reduced choice for customers.

Asda has been heavily affected by the increased popularity of discount chains Aldi and Lidl, which have threatened its place as the most value-oriented of the UK’s “Big Four” supermarkets (along with Tesco, Sainsbury and Morrisons).

Asda’s most recent accounts, to the year ending December 31 2018, show it making profit of £391 million, a £90 million increase from the year before. Its total assets at the time were valued at close to £5.5 billion, including property, plant and equipment valued at £4.35 billion.

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