EG Group is in talks to sell some of its UK assets to co-founder Zuber Issa to reduce the heavy debt burden of its petrol-station business, reported The Financial Times.
The company, co-owned by brothers Mohsin and Zuber Issa along with private equity firm TDR Capital, informed investors about ongoing discussions with Zuber regarding the divestment of assets in the UK and Ireland.
These talks are aimed at striking a deal in the near future, with the anticipated cash proceeds intended to further reduce the company’s debt load, as disclosed in a presentation seen by the FT.
This potential sale follows heightened scrutiny of the Issa brothers amid recent transactions that have interconnected the fortunes of their previously independent companies, prompting questions about potential repercussions if one were to face difficulties.
According to reports, Mohsin is in charge of supermarket chain Asda while Zuber runs the petrol station business from Blackburn. A successful agreement could also streamline the distribution of assets between the brothers.
The group had net debt of £4.6 billion ($5.9bn) on December 31, down from £7.5bn ($9.6bn) during the same period in 2022. It sold the majority of its UK and Ireland business to Asda for £2bn in October last year.
EG Group, known for its rapid expansion across various countries including the US, Australia, and Europe, has been actively seeking to reduce its debt exposure, especially following a sharp increase in global interest rates.
The news of these discussions comes amidst public speculation regarding the relationship between the Issa brothers, which Mohsin dismissed, emphasising their strong bond and shared vision for the company’s future.
Meanwhile, EG Group has also been navigating changes in its auditing arrangements, with EY stepped down as Asda’s auditor last year.
In addition to potential asset sales, EG Group has been taking steps to address its debt situation, including utilising proceeds from previous deals and strategic initiatives. These efforts include a sale-and-leaseback deal in the US and plans to use funds from the sale of KFC franchise restaurants to further repay debt.
This week the group announced plans to use £142 million from selling its 218 KFC restaurants to pay off debt once the deal is finalised in the first half of this year.
In 2023, its total revenue dropped by 6.6 per cent to £22bn, and its underlying profits decreased by 10 per cent to £860m. It reported a pre-tax profit of £40m, not counting special expenses, compared to a loss of around £152m the previous year.
EG Group has declined to comment on the ongoing discussions with Zuber Issa regarding the sale of UK assets.
