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What? 

Zuber Issa, one half of the billionaire Issa brothers, has sold his 22.5% in Asda to private equity firm TDR Capital. 

It comes after the Issa’s brothers have gone their separate ways amid a family rift.  

Mohsin Issa will continue on as a co-owner of Asda, with a 22.5% stake, alongside TDR Capital, who has a 45% stake (this will rise to 67.5%e once the takeover is complete) and Walmart, who have a 10% stake. 

The deal is set to be completed between July and September 2024. 

More on this story 

The Issa brothers partnered with TDR Capital to secure a £6.5bn takeover in 2021. 

The announcement is not surprising as reports about Zuber Issa wanting to sell his stake in Asda came to light in April. 

Mr Issa stated, “With the divestment of my Asda shares, I will now turn my attention towards leading and managing the remaining EG UK forecourt sites that I have personally acquired, and spend more time on my charitable endeavours.” 

Zuber will remain as a shareholder and non-executive board member of EG group.  

Asda: A quick glance 

What? A British supermarket and petrol station chain. 

Founder/s: Noel Stockdale, J.W Hindell in Leeds 1949 

Current owners: Mohsin and Zuber Issa, TDR Capital 

An interesting fact: Asda was established as a supermarket division called Associated Dairies, as a group of Yorkshire farmers.  

What factors have led to this? 

• Family rift. We do not know what has happened exactly, but whatever it is, sure is big enough to cause the brothers to go their separate ways. 

• Changing priorities. It has also been announced that EG Group have sold the remaining UK petrol stations to Zuber for £228mn. With both brothers being in their fifties, it’s understandable that at some point, priorities and roles will change. I won’t be surprised to hear that Mohsin Issa will have sold his shares, we should expect it even. 

What implications could this story have? 

• Unions have warned of risks to shoppers and staff. For example, GMB union argues that TDR Capital taking a larger stake would have negative effects for staff and shoppers. They stated, “Their (TDR Capital) private equity ownership has already been bad for consumers-with Asda now the most expensive retailer for fuel-and bad for staff, with millions of working hours cut from the shop floor.” This comment was made after the RAC motoring group revealed that Asda is the UK’s most expensive supermarket fuel seller. The cost of living is still high in the UK. Fuel is an important expense many people need to take into consideration when it comes to their bills. An increased stake could lead to even higher prices. Higher prices at Asda petrol stations mean less customers coming to them and more going to their competitors, such as Morrisons and Tesco. Unless change occurs, Asda will continue to not hold onto their crown for offering the cheapest fuel. 

• Further scrutiny from the Competition and Markets Authority (CMA). Last month, the CMA gained the power to monitor the fuel industry and report malpractice to the government. They published a report in July 2023, which found that Asda’s target fuel margin (the difference between what it paid for fuel and the pump price), was three times higher in 2023, compared to 2019. This could have a negative effect, as it may mean that Asda has the capacity to offer cheaper prices to customers but are choosing not to. Profit is essential to any business, but it may highlight the idea that Asda do not really want to put the needs of their customers first.  

The private equity market 

Private equity is the ownership of companies that are not publicly listed. They buy companies, change them up and sell them with the hope of earning a profit. The UK is one of the largest and most active markets for private equity deals in the world. The market size for the industry in the UK was over £3bn in 2022. With that being said, the main sourcing of private equity funding comes from companies in North America (the US), which accounts for around 30% in total. The past few years have been particularly challenging to private equity firms in the UK and around the world. 

According to KPMG, mid-market private equity investment activity in the UK slowed by 10% in 2023. Some of the main factors are economical and geo/political in nature. These include: 

• High interest rates 

• High inflation 

• Deepening tensions between the US and China 

• Investors having an increased uncertainty about the future domestic and international private equity markets 

More recently, a US appeals court rejected a Securities and Exchange Commission (SEC) rule that would have forced private equity firms, hedge funds, venture capital funds and managers of funds for institutional investors (pension funds is an example), to be more transparent. The proposed rules would have had such private fund managers give investors detailed quarterly performance and fee reports, perform annual audits and would have limited secret side deals that would have given more favourable terms to some investors. The appeals court stated that the SEC went beyond the scope of their powers. The purpose of the rules would have been to increase transparency, fairness and accountability in an industry that is generally obscure. 

This proposed rule, although attempted to be enforced in the US, could be tried in other jurisdictions. When the world's largest market for private equity wins a case, all other involved parties pay attention. 

Linking this back to the overall story more broadly, TDR Capital is a British private equity firm. One would be somewhat surprised, given the fact that more and more American private equity firms have been eyeing and swooping up British businesses. According to Private Equity Wire, there were 181 acquisitions in 2022/23, which was up from 134 in the 2021/22 period. TDR Capital acquired a stake in Asda.  

Closing thoughts: 

Leaders at the very top of a business will have to know that they will hand over the reigns to someone else at some point. As for who will replace Zuber Issa, if there will be a replacement at this, it remains unknown.  

I think Asda should continue to work on trying to bring the price at the pump down, so they can attract more customers and get back their crown of being the cheapest supermarket fuel seller. More customers is always good for business. 

That’s it for this week! 

Until next time, remember to stay curious! 

What are your thoughts on this story? Do you think Mohsin will shift his priorities any time soon? Do you think Asda will become the UK’s cheapest supermarket fuel seller once again? I’d love to know your thoughts. You can comment below, message me on any of my social media platforms, or send an email: hello@parahinsights.com 

Further resources: 

‘Billionaire brother Issa brothers split up as Asda takeover announced’- Article by City AM 

‘Billionaire Brothers Asda owners-ISSA Brothers from Lancashire, EuroGarages Group- YouTube video by Safaraz Ali 

‘Asda-owning Issa brothers divide their empire as Zuber sells supermarket stake’-Article by The Guardian 

‘Issa brothers: How to turn a petrol station into an empire for billionaires—Article by City AM 

‘The split road for South Africa’- Podcast by the FT News Briefing 

‘UK private equity investment slumps in 2023, but green shoots of hope for 2024’- Report by KPMG 

‘US appeals court strikes down SEC private equity, hedge fund oversight rule’- Article by Reuters 

DISCLAIMER:  

This blog is for informational purposes only. Parah Insights is not associated with the news sources in this blog, and sharing does not equal endorsement. Parah Insights does not provide financial, tax, legal or accounting advice – always consult your financial and legal advisors to determine what’s right for you and your business.