Speculation is growing that EG Group will sell off a significant number of its sites to avoid a major investigation into the takeover of Asda by the group’s founders, Zuber and Mohsin Issa, and their backers.
The competition watchdog the CMA has identified 36 local areas where it believes proximity of EG Group sites and Asda forecourts could lead to a lessening of competition and therefore a risk that fuel prices could rise.
It has given the parties involved in the deal 10 working days to come up with a solution or it will trigger a phase two investigation which would bog down the deal for many months and incur major costs to provide all the data required by the CMA.
PRA chairman Brian Madderson said that with stage two investigations having the potential to drag on for as long as 18-24 months it was likely EG Group would do whatever it could to avoid one.
In similar cases, including MFG’s takeover of MRH, the companies have agreed to divest sites to remove the competition concerns. With Asda’s forecourt sites being part of their supermarket offering it is thought that most if not all the sites that would need to be divested would be Euro Garages sites.
According to a report in The Telegraph experts believe EG Group may have to sell between 40 and 50 sites in order to satisfy the CMA.
With EG Group known for investing heavily in its sites this would lead to a lot of high-value forecourt sites coming onto the market, and will no doubt attract a lot of interest from potential buyers.
Gerald Ronson, chairman of rival Top 50 Indie Rontec, told The Telegraph: “We’re in the market to buy the right sites. If they have sites that they want to sell we would be pleased to have a look at them. We don’t have any debt and we have substantial cash. We’re buyers.”
The CMA did not identify the 36 local areas where it anticipated competition issues, but real estate experts Altus reported overlaps between EG Group and Asda forecourts in a number of locations including: Birmingham, with two EG sites and six Asda sites; Leeds, with four EG sites and five Asda sites; Liverpool, with three EG sites and six Asda sites; and Manchester, with seven EG sites and eight Asda sites.
Other than the geographical overlaps, however, the CMA did not anticipate the deal would have a national effect on pricing. It said evidence suggested that Asda had a reputation for the lowest price petrol and any move to increase its prices would cause damage to its brand and reputation at a cost which would outweigh any greater income from its fuel business. It therefore expects Asda will maintain its pricing strategy if the deal goes ahead.