ASDA sets €840M buyout loan meeting, with bonds to follow

The €840 million, five-year term loan backing the Issa brothers and TDR Capital's acquisition of ASDA Group Ltd. is out to market ahead of a lender meeting today. Further one-on-one meetings will follow through to Feb. 5, with commitments due by noon London time on Feb. 16 via a bookrunner group led by lead-left Barclays.

Ahead of the meeting, the leads are guiding ratings to emerge at Ba2/BB- (corporate) and Ba2/BB (issue) from Moody's and Fitch Ratings, respectively. Deutsche Bank and Morgan Stanley are joint physical bookrunners, while BofA Securities, Lloyds, Rabobank and HSBC are joint MLAs and bookrunners. Bank of China, Intesa Sanpaolo, Commerzbank, NatWest, SMBC and Barclays are MLAs.

The Issa brothers and TDR announced the acquisition of British supermarket group ASDA from Walmart for £6.8 billion in October 2020. In addition to the loans, a £2.25 billion secured bond offering and £500 million of unsecured bonds will follow, according to a company statement. Walmart will retain a minority holding in the business.

Should the £2.25 billion secured bond be a single-tranche offering, which LCD expects, then it will be the largest ever single-tranche issue in the European high-yield market, surpassing the €2.25 billion of secured FRNs from Wind Tre in 2017, and €2.10 billion of fixed-rate notes from Wind in 2014, according to LCD. The sterling bonds will also be the largest single-tranche sterling notes offering, with the previous largest being the £1.1 billion issue from Virgin Media in 2013, followed by Stonegate Pubs at £950 million in 2020. It also smashes the record for the largest amount raised in sterling bonds in one go, with Virgin Media in 2013 issuing £1.35 billion across two sterling bonds.

In their statement today, the buyers said they expect to complete the acquisition of ASDA later this month (subject to approval from the Financial Conduct Authority). The new owners plan to invest more than £1 billion into the group over the next three years to strengthen the business and supply chain.

On completion of the deal the shareholders plan to sell ASDA's forecourts business to EG Group, the petrol station group also owned by the Issa brothers and TDR, for an headline enterprise value of £750 million, or a multiple of more than 11x EBITDA. The deal is subject to clearance from the Competition and Markets Authority and, on completion, the assets (which comprise petrol filling stations, car washes and ancillary land) will be integrated into EG Group's U.K. operations.

In a second transaction announced today, the owners said that — on receipt of final regulatory clearance of the ASDA takeover — they plan to sell certain distribution assets to institutional real-estate investors. ASDA will continue to operate the distribution assets and the deal will have no day-to-day impact on the sites, the supply chain or workforce.

ASDA is a multi-format retailer that sells its products of through a network of 584 grocery stores, 18 stand-alone petrol-filling stations and 33 ASDA living stores, as well as online. In addition to grocery and general merchandise, ASDA operates George, a U.K. clothing retailer. It also has a significant property portfolio, of which 75% of the square footage is freehold.