Asda’s new owners, the Issa brothers and TDR Capital, are reportedly considering selling the grocer’s fashion label George. This comes as part of Asda’s drive to cut its costs and spending. According to reports, the brothers are looking to sell as the fashion sector is outside of their area of expertise. Instead, they are looking to license the brand or bring new fashion partnerships into the excess space in Asda stores. Selling the brand would help reduce the group’s debt.
Mintel comment:
“The deal to acquire Asda from the Issa Brothers and TDR Capital was one of the largest leveraged buyouts of all time, with the structure of the deal meaning that 90% of the purchase price was borrowed and subsequently became a debt to be paid by the new owners.
That is why the new owners have looked to sell aspects of the Asda business to reduce this debt quickly, including the forecourts and the warehousing and logistics. These remain part of the Asda operation, but rather than direct ownership they are leased back or run in partnership.
George would be by far the largest of these deals and one where the biggest eyebrows would be raised, particularly if it was a direct sale to an outside party. George is integral to Asda, the largest of the supermarket clothing brands and overall the seventh, by value, largest clothing brand in the UK. These are only rumours, and we should treat them as such, but the removal of George from direct control from Asda may make financial sense in the short term, but would surely long-term hurt the total value of the Asda business.”
