To sell, or not to sell? That is the question for EG Group – Could Circle K be the new owners?

To sell, or not to sell? That is the question for EG Group – Could Circle K be the new owners?
EG Group's Issa brothers

The Issa Brothers have been much in the news of late – not just for the announcement around the roll out of Asda c-stores across its forecourts in GB – but also for the speculation that they are considering selling their $15bn forecourt empire.

The billionaire brothers started with just one petrol station in the north of England. Now, the Asda owners, are considering selling their forecourt empire EG Group in a deal that could value the company at $15bn (£10.8bn), according to widespread reports.

Circle K is reported by Bloomberg to be one of the interested parties.

Bloomberg reported that a deal to sell the company, which is backed by the Issa brothers and private equity firm TDR Capital, could fetch as much as $15bn.

EG Group could attract interest from operators looking to scale up their business. Interested parties could include Seven & i Holdings Co, the Japanese company that controls 7-Eleven, which completed its $21 billion purchase of Marathon Petroleum Corp.’s Speedway gas stations in May.

According to Bloomberg, Alimentation Couche-Tard Inc., the owner of Circle K convenience stores, has also been seeking to expand through acquisitions overseas. Just last week (10th September), Circle K also announced that it has acquired 10 Griffin Group convenience stores in Dublin (subject to approval from the CCPC) – which could be a solid indicator that Circle K and its parent company Alimentation Couche-Tard are keen to follow a strategic switch towards convenience store retailing. This marks Circle K’s first move onto the high street in Ireland and also represents its first multi-site acquisition of standalone stores in Europe.

Possible float

It is not the first time the EG Group has weighed up a float. Back in 2019 it considered taking the step, with a valuation of over £$10bn. Discussions are in early stages and there is no guarantee they will result in a deal, the Bloomberg report said.

EG is one of the largest petrol station owners in the world, with more than 6,000 sites across the UK, US, mainland Europe and Australia.

Circle K is the largest forecourt retailer in Ireland, with over 400 sites, north and south.

After the Issa brothers took over Asda, the Competition and Markets Authority (CMA) warned that the combination of EG and Asda’s petrol station portfolio could negatively affect petrol prices for drivers.

The Issa siblings said that they would sell off 27 of Asda’s forecourts to assuage the concerns, which the CMA accepted. The roll out of around 300 convenience stores on Asda forecourts was announced just a few weeks ago.

There are no EG Group forecourts in Ireland currently. There are around 10 Asda petrol stations in the North.

Portfolio value

The U.K. company is working with advisers including Rothschild & Co., Goldman Sachs Group Inc., Morgan Stanley and Barclays Plc as it weighs strategic alternatives. It could be valued at about $15 billion in any deal.

EG Group

EG Group, which is backed by TDR Capital and the billionaire Issa brothers, has grown rapidly through a series of acquisitions in the past few years. The company now has around 6,000 sites spread across countries including the U.K., U.S., France, Italy, the Netherlands and Australia, according to TDR’s website.

In 2018, EG Group purchased Kroger Co.’s U.S. convenience store business for $2.15 billion. The next year, it bought Cumberland Farms, gaining 600 locations in a deal that made it the fifth-largest independent convenience-store operator in the U.S. The company also spent A$1.73 billion ($1.3 billion) to acquire 540 Australian fuel convenience sites from Woolworths Group Ltd.

Deliberations are in the early stages, and there’s no certainty they’ll result in a deal. EG Group could also explore an initial public offering.

EG Group has placed more focus on the higher-margin convenience store side of its operations, along with takeaway food, as the volume of fuel sales declines globally. It has partnerships with brands including Burger King, KFC, Starbucks and Subway to run franchises at its gas stations.