Asda’s Financial Struggles
Asda, a supermarket chain, is selling 24 of its stores and will lease them back as it struggles to cope with mountains of debt. The company has assured that there will be no changes to the stores or the Lutterworth depot, which was also sold under a leaseback agreement.
Asset Stripping Concerns
The GMB union has criticized the move as “asset stripping” by the private equity chain, stating that morale will be hit. According to Nadine Houghton, GMB national officer, debts, lease liabilities, and interest payments are increasing, while market share and staff morale are at an all-time low. GMB members have reported falling health and safety standards and increased levels of stress caused by asset expropriation.
Private Equity Ownership
Asda was acquired by billionaires Zuber and Mohsin Issa, backed by TDR Capital, in 2020. The supermarket had a net debt of £3.8 billion at the end of 2024, the same as at the end of 2023. The company’s ownership has been the subject of political scrutiny, with MPs raising questions about its labyrinthine corporate structure, which includes 16 different entities between the owners and the supermarket operating company, many of which are registered abroad.
Store Sales and Leasebacks
Two separate buyers were found for the stores: four stores were sold and leased back to property manager DTZ Investors, while 20 stores and the Lutterworth depot were sold to private lending group Blue Owl Capital and leased back. The rental agreements have a term of 25 years with the option to extend for a further 10 years. The transactions raised £568 million, according to an Asda spokesman.
Future Plans
Asda’s real estate strategy focuses on maintaining a strong ownership base while taking a considered and selective approach to unlocking value from its estate. The company believes that these transactions reflect this approach and allow it to extract value from the sites while maintaining full operational control. The supermarket chain aims to improve its financial performance and reduce its debt pile, which has been a subject of concern in recent years.
