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Walmart Inc.’s 1999 acquisition of Asda looked set to disrupt the U.K. supermarket business, with the U.S. retailer using its deep pockets to shake up entrenched players like Tesco Plc and J Sainsbury Plc.

The purchase never quite lived up to the hype. Asda struggled to defend its market share against bigger rivals and the German discounters Aldi and Lidl. On Friday, the world’s largest retailer began a retreat, selling a majority stake in Asda to buyout firm TDR Capital and the Issa brothers, who made their wealth in gas stations.

Walmart hailed the deal as creating the “right ownership structure for Asda, whilst bringing a new entrepreneurial flair” to U.K. retailing. Yet the buyers will face the same challenge that frustrated Walmart: Finding a winning strategy in arguably the world’s most competitive grocery market at a time when the way people shop is changing and the pandemic and Brexit are making food security more vital than ever.

Walmart Pulls Plug on U.K. With TDR’s $8.8 Billion Asda Deal

“The deal raises more questions than answers,” said Clive Black, a retail analyst at Shore Capital. “Whether or not the raw entrepreneurship and ambition of the Issas is enough to drive greater same-store sales and cash flows per square foot on a sustained basis remains to be seen.”



a sign on a pole: Walmart Said to Pick TDR as Preferred Bidder for U.K. Unit Asda


© Bloomberg
Walmart Said to Pick TDR as Preferred Bidder for U.K. Unit Asda

A no entry sign stands at an Asda supermarket, operated by Walmart Inc., in London, U.K., on Monday, Sept. 28, 2020.

Photographer: Simon Dawson/Bloomberg

TDR and the Issa brothers — Mohsin and Zuber — plan to invest more than 1 billion pounds ($1.29 billion) over the next three years to expand Asda’s U.K. suppliers and drive more online sales, while using their expertise in convenience

By Kate Holton and James Davey

LONDON (Reuters) – Britain’s billionaire Issa brothers and private equity group TDR Capital have bought Asda from Walmart in a deal which gives the British supermarket chain an enterprise value of $8.8 billion and the buyers a platform to roll out smaller stores.

Mohsin and Zuber Issa, who founded petrol station operator EG Group nearly two decades ago, are taking Asda back under British ownership for the first time since 1999, when U.S. retail giant Walmart

paid 6.7 billion pounds for it.

“The Issa brothers have a reputation for good brand partnerships, for convenience and for growth and that’s really what we were interested in for Asda,” Judith McKenna, President and CEO of Walmart International told Reuters on Friday.

McKenna said the deal was not about job cuts and the new owners said they are targeting growth by expanding into convenience shops from its large supermarket and online operations, bringing Asda more in line with market leader Tesco

and No. 2 Sainsbury’s

.

The Issas said they wanted to utilise their experience to help “build a differentiated business” at Britain’s third-biggest supermarket chain, in which Walmart will retain an unspecified minority stake, as well as a commercial relationship and a board seat.

British retail veteran Roger Burnley will remain as CEO of Asda in a deal which ratings agency Moody’s said allows Walmart to continue to refocus its international efforts on markets with more long-term upside, such as India and China.

McKenna would not say for how long Walmart has committed to remain an investor or comment on the possibility of an initial public offering (IPO).

“The brothers and TDR will help make decisions about what that future path looks like,” she said.

The new owners said they will invest more than 1 billion