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 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