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March 9, 2023: The Issa brothers, owners of Asda, have sold a portion of their US retail and gas station property empire for $1.5bn in a sale and leaseback deal. The EG Group has agreed to the deal with San Diego-based Realty Income Corporation. The company will continue to operate and trade the 415 stores under the Cumberland Farms, Fastrac, Tom Thumb and Sprint banners. Approximately 80% of the total portfolio is based in the Northeast US, including around 116 properties in Massachusetts, 87 in New York, and in the Southeast 74 in Florida, the top three states in the portfolio.
The deal will see EG America lease the assets back for a $103m annual rental fee. The sale of around 15% of its real estate empire is part of EG Group’s “commitment to reduce total net leverage through debt reduction and free cash flow generation.” The company has at least $9bn of debt due in 2025, and the majority is made up of loans with interest pegged to the LIBOR, EURIBOR and SONIA indices. These rates have quadrupled in the past five months, leading to increased debt interest.
Zuber Issa, the co-founder of EG Group, put a positive spin on the deal, saying: “This announcement demonstrates the progress we continue to make to put in place a robust capital structure for the medium term that will underpin our long-term strategy and represents an important first step in this process.”
After the siblings acquired Asda two years ago for $8.1bn alongside private equity firm TDR Capital, food and gas retail has seen challenging conditions. In January, there were reports that the partners might combine both profitable businesses into a $15.5bn corporation to refinance the debt on more favourable terms. However, Asda has seen an uptick in fortunes, with sales up 6.4% over the all-important Christmas Holiday season and followed up with a 6% rise in sales in the 12 weeks to Jan. 23.
EG Group has over 6,600 sites across the world, and in February, the company opened its 100th Asda On The Move store and confirmed plans to open a further 100 of the neighbourhood and gas station sites across the UK this year. The Asda On the Move concept was launched in the Fall of 2020, and the 100th store in Middlesbrough is one of 35 that have opened so far this year on EG Group’s existing forecourt estate.
