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Cerberus Capital taking over Asda? Another private equity success story in the making


sancho panza

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Bornagain
On 28/09/2020 at 21:26, One percent said:

Asda is rank.  They don’t put them in deprived areas by mistake. 

This, very much this.

If you ever want to be reminded of the cantina in Mos Eisley spaceport then go for a wander around Asda in Grimsby,  its probably a good idea to take a bodyguard.

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spygirl

Industry insiders describe the brothers as softly spoken and modest. At one industry awards ceremony several years ago, the brothers were present but were said to be too shy to claim their award on stage.

People who know them say that part of their success is in remaining curious about competitors and being willing to learn and pick up new ideas.

The Sunday Times values their fortune at £3.56bn.

 

I think the majority of their success is idiot EU based banks lending them loads of money in the daft hope they know what they are doing.

They run petrol stations. They sell shit overpriced coffee and warm food that should be cold and cold food that should be warm.

 

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Well, that's the beginning of the end for Asda.

I give it 3 years before it is on the ropes, 5 years and it'll be over.

I won't miss it -- I don't think I've ever shopped there.  But it does seem a shame, regardless.

Edited by dgul
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Ash4781b
On 01/10/2020 at 13:41, Bornagain said:

This, very much this.

If you ever want to be reminded of the cantina in Mos Eisley spaceport then go for a wander around Asda in Grimsby,  its probably a good idea to take a bodyguard.

Yeah it’s odd couldn’t put my finger on it but environment grim. Looked at the meat Section and was like oh that’s what They serve up.

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Gloommonger
3 hours ago, spygirl said:

Sold to the pair of daft muzzer Indian fuckers who dont quite grasp how much debt theyve taken on.

https://www.bbc.co.uk/news/business-54383131

 

Says the billionaire knowall! They turned 1 petrol station into 5000 and nobody has heard of them. Put an Asda into every service stop might help the bottom line.

Debt doesn't matter these days, don't see Branson, Trump or Sugar down the jobcentre!

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spygirl
3 hours ago, dgul said:

Well, that's the beginning of the end for Asda.

I give it 3 years before it is on the ropes, 5 years and it'll be over.

I won't miss it -- I don't think I've ever shopped there.  But it does seem a shame, regardless.

ASDA a funny one.

V early super market from Laayds!!

We've never really had a local one.

Not really a space for it anymore

I'd be fucked off if Morrisons went - they are differentiated and cheaper.

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Ash4781b
1 hour ago, Gloommonger said:

Says the billionaire knowall! They turned 1 petrol station into 5000 and nobody has heard of them. Put an Asda into every service stop might help the bottom line.

Debt doesn't matter these days, don't see Branson, Trump or Sugar down the jobcentre!

Maybe needed to diversify in the new post covid world less need to visit petrol stations. Then electric on the horizon. But hey everyone will have made out like bandits by then ?

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spygirl
1 hour ago, Gloommonger said:

Says the billionaire knowall! They turned 1 petrol station into 5000 and nobody has heard of them. Put an Asda into every service stop might help the bottom line.

Debt doesn't matter these days, don't see Branson, Trump or Sugar down the jobcentre!

No.

They turned some petrol stations and several billion of debt.

Youd have to be a daft to think they grew organically, off retained revenue.

Logistics off a shore market, where you have a fully packed hgv going to stores doesn't scale to the smaller local shops, never mind petrol stations.

This a bodybuilder who used a similar technique to get large fast

https://www.thesun.co.uk/news/9486445/russian-bodybuilder-inject-biceps-oil-surgery-uk/

Trump has destroyed wealth during the last 30 years. Hed have been better off putting his family cash in bonds and playing golf.

Branson is brassic

Sugar made junk property, then went v big into commercial property. Something he keeps v quite about these days.

Edited by spygirl
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sleepwello'nights

How's Gerald Ronson and his Heron International family business going?

Seems he started with some petrol stations as well.

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steppensheep

I used to go to the asda in Clapham junction occasionally, a quarter of a century ago. It was quite decent. I recall they had a policy of refunding double your money if there was a price/till mistake. Maybe that's where they went wrong.

 

Walmart never made a success of Real in Germany either. The UK isn't the only competitive supermarket nation.

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The Grey Man
6 hours ago, dgul said:

Well, that's the beginning of the end for Asda.

I give it 3 years before it is on the ropes, 5 years and it'll be over.

I won't miss it -- I don't think I've ever shopped there.  But it does seem a shame, regardless.

My guess is the finance guys have stumped up enough to own this via the front of these brothers.

Give them a chance.

At any sign after some unspecified time they might pull rank, gain control, flog assets, ramp up debt and turn into the usual non growth zombie corp.

They likely figure given the uncertainties economy wise give them a chance.

My bets on zombie corp in the next two years. They were lucky enough to be in a position to be given it a go.

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Democorruptcy
On 28/09/2020 at 21:26, One percent said:

Asda is rank.  They don’t put them in deprived areas by mistake. 

They help keep prices down. Tesco & Waitrose will be pleased.

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spygirl
38 minutes ago, Harley said:

Reading the DM they seem to be saying there were two bidders, the brothers and a PE company with a 50% stake in the brother's company?

https://www.dailymail.co.uk/news/article-8797931/Self-billionaire-brothers-agree-deal-buy-Asda-Walmart-6-8billion.html

You make it sound more equitable and thougth than it was.

This will end up with both sides in court arguing who signed and hos liable for what.My guess itll make the Kraft Heinz  leveraged fuckup from 3M look like a good investment.

 

 

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leonardratso

i thought he was a retard, you know one of those virue signalling ads that uses any monority - or should i say exploits, looks indian so thats the race box ticked, but then i really thought he might be a bit slow so thats another box ticked.

Edited by leonardratso
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  • 2 weeks later...
wherebee

https://www.9news.com.au/national/rm-williams-boot-maker-bought-by-andrew-twiggy-forrest-adelaide/920eb858-6d6e-4fe2-9f15-c70a71555d5f

 

I wrote about PE sniffing around RMWilliams, so good to see a rich aussie putting money where he should.  It's a very good quality product and as per the article above employs almost a thousand factory workers onshore plus I would guess another thousand in shops around the country.

 

Yay for onshoring.

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spygirl
9 hours ago, wherebee said:

https://www.9news.com.au/national/rm-williams-boot-maker-bought-by-andrew-twiggy-forrest-adelaide/920eb858-6d6e-4fe2-9f15-c70a71555d5f

 

I wrote about PE sniffing around RMWilliams, so good to see a rich aussie putting money where he should.  It's a very good quality product and as per the article above employs almost a thousand factory workers onshore plus I would guess another thousand in shops around the country.

 

Yay for onshoring.

Compare the quality of basically the same Doc show bought from Solovair, still abed in the UK, same factory, same employees, wit the same design from Dr Marten who are up to their ~3 shift in production. IIRC its gone Uk -> China -> Vietnam.

The initial cost reduction was soon lost.

The quality of Docs from Dr Martens has been shit every since.

You might be able to outsource trainers - clothe and glue.

Cant say the same for leather and rubber and the welt stitching.

 

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  • 3 months later...
Bear Hug

That's some leverage. What can possibly go wrong. 

So they had just enough to buy petrol stations but borrowed the rest at 3.4% pa. 

https://www.bbc.co.uk/news/business-56085128

Asda has new owners.

The Issa brothers, two entrepreneurs from Blackburn who made billion-pound fortunes running petrol stations, have completed the deal to buy Britain's third-largest supermarket chain.

Asda was valued at £6.8bn, but the brothers and the investment firm TDR Capital paid just £780m.

The rest of the money was borrowed. So how does this kind of deal work? And will it leave Asda with too much debt?

How does the deal work?

This kind of deal is called a leveraged buyout - which means that it involves large amounts of debt.

TDR Capital specialises in this kind of deal. It is also co-owner of EG Group, the worldwide petrol station business which built the brothers' fortune, and which also has large borrowings.

The Issas and TDR each contribute half of the £780m in cash to Asda's former owners, Wal-Mart, which has owned Asda since 1999.

Most of the purchase price - just under £4bn - will be borrowed.

Walmart, the American supermarket which owned Asda for the past 21 years, will retain a small stake in Asda, for £500m, along with a seat on Asda's board.

Then the new owners will sell off parts of Asda to raise the rest of the purchase price.

Asda will sell its warehouses and distribution system for £950m. It will still use them, but in future, it will have to pay rent to their new owners.

And Asda's 323 petrol stations will be sold for £750m to EG Group, adding to the portfolio of more than 6,000 around the world.

The deal is still awaiting approval from the Competition and Markets Authority, which is expected by the summer.

Graph showing the structure of the Issa brothers and TDR's buyout of Asda

How can you buy a business with such a small percentage of the purchase price?

Buying a £6.8bn business for less than £800m has certainly raised eyebrows, but it is not unusual for buyers to put up only a small fraction of the purchase price in such big deals.

"10% looks low, compared to the average for leveraged buyouts as a whole of around 50%," says Roberto Pozzi, senior vice-president at Moody's, an agency which analyses the riskiness of company's borrowings.

"Keep in mind that it depends also on the stability of the business, and there is no more stable business than supermarkets," he adds.

Firms such as TDR Capital, known as private equity firms, have backed nearly 5,000 buyout deals over the past decade, worth a total of £350bn, according to research firm Preqin - although the Asda buyout is the largest in more than a decade.

How much does Asda owe?

With big debts come fears that paying interest on the debt will suck money away from investing in the business or paying staff.

But interest rates are currently extremely low, which will made Asda's debt burden affordable.

On the £3.7bn of Asda's debt which is being raised on public markets, the interest bill will be just £125m a year, according to Azhar Hussain, head of global credit at the Royal London Asset Management. Leasing back the warehouses will cost about £57m a year.

So the £500m or so of cash which Asda makes each year will easily cover the interest costs incurred in the buyout, leaving plenty spare to pay down the debts and reduce Asda's borrowings even further.

The debt burden will be higher than supermarket rivals Tesco and Morrisons, but it's expected to fall over time as new owners pay the debts off.

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  • 2 months later...
dgul

Looks like they've now bought up 'Leon' as well, which appears to be some sort of restaurant chain.

It'll blow up one day, leaving thousands without jobs and the Issa brothers still in the money.

I don't really understand why anyone lends them the money (certainly not to buy restaurants during a pandemic that might never end and at the end of a credit cycle).

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  • 2 weeks later...
Ash4781b

Embrace ‘the concept’. I mean who sits there in the meeting. maybe we sell second hand clothes and charge a juicy margin. We’ll sell them for more than new price? Haha silly customers. Or maybe they are planning to sell trousers for 50p and the like?

”Supermarket chain Asda is to start selling second-hand clothes in 50 of its stores across the UK.

The retailer said the concept had already been successfully tried out at a store in Leeds, and it now plans to stock the used garments more widely.”

https://www.bbc.co.uk/news/business-56916414

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