Asda’s £438m deal to fuel ambitions in convenience retail

exterior of asda livingston service station
Asda and the Co-op believe the forecourts sale will benefit both businesses.
SEVEN Scottish petrol stations are set to change hands as part of a major deal that will see the Co-op sell its entire forecourt estate to Asda.

The supermarket chain will shell out £438 million as part of its growth strategy to move into the convenience market.

What Asda will get for its money is 129 petrol filling stations, the vast majority with a well-established grocery store of between 1,500 and 3,000 square feet, and three development sites.

The Scottish sites being sold with stores are in Dounby on Orkney, Stonehaven, Dundee, and Earlston and Lauder in the Borders.

In addition, the forecourts and kiosks – but not the stores – will change ownership in Broadford on Skye and Aberfeldy in Perthshire.

UK-wide, the 2,300 staff currently employed in the Co-op stores will transfer to Asda’s employment under TUPE transfer following completion of the acquisition and after a transition period.

The stores being bought as part of the transaction delivered net sales of £863m for the 12 months to June.

The move is part of Asda’s ambitions to become the second-largest supermarket
chain – it is currently third behind Tesco and Sainsbury’s.

Asda co-owner Mohsin Issa said: “We have always been clear in our ambition to grow Asda and are hugely excited to create this new and distinct part of our business, giving us the opportunity to bring Asda value in fuel and groceries to even more customers and communities across the UK.

“We see convenience as a significant growth opportunity for the business. This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second-largest supermarket.

“We look forward to welcoming the Co-op colleagues to this new part of our business after we complete the transaction and due processes in the coming months.”

The Co-op plans to use the money to reinvest in its core convenience stores business, grow its wholesale, franchise and e-commerce operations and invest in technology and logistics among other things.

Co-op chief executive Shirine Khoury-Haq said: “This transaction is in line with our strategy to move away from operating forecourts and supports our vision of Co-operating for a fairer world while building our core leading convenience business.

“I would like to thank our incredible colleagues in these forecourt stores, and we will work closely with Asda to ensure a smooth transition.”

Asda currently runs about 320 forecourts across the UK. Billionaire owners Mohsin and his brother Zuber Issa also run the EG Group, which operates hundreds more petrol stations nationwide.

This factor has prompted speculation among some industry analysts that the Competition and Markets Authority (CMA) will scrutinise the Co-op/Asda deal.

An Asda spokesman said: “We look forward to discussing the transaction with the CMA. We fully respect the obligations of the CMA to conduct its work and will, of course, co-operate with them.”