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EG Group is in talks to offload some UK assets to billionaire co-founder Zuber Issa in what the company told investors was an attempt to reduce the debt pile of its petrol-station empire.
The group — co-owned by brothers Mohsin and Zuber Issa and private equity firm TDR Capital — told investors on Monday that it “continued to have active discussions” with Zuber about divesting some assets in the UK and Ireland, with plans to strike a deal “in the near term”.
“The net cash proceeds would be used to further repay debt,” according to a presentation seen by the Financial Times.
A sale of assets to Zuber would come after intense public and political scrutiny of the Issa brothers, who built a retail empire from scratch with the backing of TDR. Recent transactions have tied the fortunes of their previously independent companies to each other, raising questions about what will happen if one were to run into trouble.
The deal, if agreed, could also neaten the division of assets between the brothers, who oversee different parts of the Lancashire-headquartered group. Mohsin, in Leeds, is in charge of Asda — the supermarket chain that is also co-owned by the brothers and TDR — while Zuber runs the petrol station business from Blackburn.
EG, which has expanded at breakneck speed over the years in countries including the US, Australia and Europe, has been seeking to reduce its debt pile after a sharp rise in global interest rates. It had net debt of $5.9bn on December 31, down from $9.6bn during the same period the year before.
In October, EG completed the sale of the majority of its UK and Ireland business to Asda for £2bn in a leveraged buyout.
News of the talks comes after Mohsin dismissed speculation this week about a rift with Zuber. Mohsin said the pair “get on exceptionally well” in a BBC interview, adding: “We talk to each other probably two or three times a day. We’ve been very, very privileged. We have been on a journey and we have got a long way still to go.”
EY quit as Asda’s auditor last year. Last month, Mohsin confirmed he was in a relationship with Victoria Price, a former tax partner who left the Big Four firm shortly after EY resigned as Asda’s auditor. The couple said in a statement that they were “building a life together”.
Any deal with Zuber would be expected to include about 30 remaining UK petrol stations not included in the £2bn Asda deal and certain food locations, a person familiar with the situation said. It would exclude EG’s electrical vehicle-charging business and some other assets, according to the documents.
EG told investors on Monday it used the proceeds from a $1.4bn sale-and-leaseback deal in the US to slash debt in 2023 as well as the £2bn from the disposal of the majority of the UK business to Asda, among other steps.
The reduction in debt was offset by net external interest of $759mn, investments of $367mn and fixed rents totalling $340mn, it added.
The group on Monday said it was expecting to use $182mn from the sale of its 218 KFC franchise restaurants to repay debt after the deal completes in the first half of this year.
Total revenue was down 6.6 per cent to $28bn in 2023, while underlying profits fell 10 per cent to $1.1bn. It posted a pre-tax profit excluding exceptional expenditure of $51mn, according to the documents, compared with a loss of $196mn the year before.
EG Group declined to comment.