Walmart Revives Plan to Sell Stake in U.K. Grocery Chain -- Update
July 20 2020 - 11:44AM
Dow Jones News
By Cara Lombardo, Sarah Nassauer and Ben Dummett
Walmart Inc. has relaunched the planned sale of a majority stake
in its U.K. grocery-store chain Asda Group Ltd. after putting the
process on hold in April to focus attention on managing its
operations through the pandemic.
The U.S.'s largest retailer has invited potential buyers to
submit offers for its U.K. business, according to people familiar
with the situation. The Asda business was valued around $9 billion
in 2018.
"Walmart and Asda have restarted conversations with a small
number of third-party investors who are interested in acquiring a
stake in Asda," said a Walmart spokesman Monday.
Current bidders couldn't be learned. But private-equity firms
such as Apollo Global Management Inc., Lone Star Funds and TDR
Capital LLP had previously vied to acquire a majority stake of Asda
and are likely to take another look, some of the people familiar
with the situation have said.
Walmart's decision to remount the sale attempt comes at a time
when the grocery sector is hot. The coronavirus pandemic has
shifted shopping habits, with more consumers focused on buying just
essentials such as food or ordering online, resulting in a surge in
sales. To take advantage of this growth, Albertsons Cos., a Walmart
competitor in the grocery sector, went public last month. Its
shares slipped on their first day of trading after pricing below
expectations and are little changed since.
Walmart had said in February that it was considering a possible
stake sale of Asda after receiving interest from potential bidders.
But the fallout from the coronavirus outbreak forced the
supermarket giant during the past few months to prioritize meeting
the surge in demand for food basics amid the pandemic lockdown over
the possible Asda sale.
In the U.S., where Walmart does the bulk of its business, the
retailer has hired more than 400,000 additional store and warehouse
workers since mid-March, while Asda has brought on at least 22,000
new employees to help keep shelves stocked with ground beef, toilet
paper, cleaning supplies and other products.
But Walmart said in May that it is well positioned to manage
through the crisis, signaling that the pressure on its operations
is easing. At the same time, the launch of the Asda sale now allows
the Bentonville, Ark.-based retailer to take advantage of strong
demand for groceries to try to achieve a high sale price. The
challenge will be convincing potential buyers that current demand
is sustainable after the pandemic passes.
A sale would mark Walmart's latest move to reorganize its
international operations by retrenching from challenging markets in
favor of bets on the growth in online services in other
countries.
Walmart previously tried to sell Asda to rival U.K. supermarket
operator J Sainsbury PLC in 2018, as it was working toward buying
India's Flipkart Group for $16 billion. The Sainsbury deal would
have valued Asda at GBP7.3 billion ($9 billion), but U.K.'s
competition watchdog blocked the deal last year, concerned it would
reduce competition and potentially spur higher prices for
shoppers.
Asda ranks among the U.K.'s biggest supermarket retailers along
with Tesco PLC, Sainsbury, and discounters Aldi and Lidl.
A private-equity buyer is less likely to face scrutiny unless
they own a business that already ranks among the market's biggest
operators.
The possible Asda sale is the latest auction to come back to
life as economies start to emerge from the pandemic. Marathon
Petroleum Corp. has renewed discussions with potential buyers for
its Speedway gas-station unit, the Journal reported.
Write to Cara Lombardo at cara.lombardo@wsj.com, Sarah Nassauer
at sarah.nassauer@wsj.com and Ben Dummett at
ben.dummett@wsj.com
(END) Dow Jones Newswires
July 20, 2020 11:29 ET (15:29 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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