Walmart sells Asda for $8.8 billion; Google delays launch

The British billionaire Issa brothers and private equity group TDR Capital have agreed to buy the British supermarket chain Asda from Walmart for $8.8 billion to take on rivals such as Tesco with new smaller stores.

The deal, led by Mohsin and Zuber Issa who founded the petrol station operator EG Group nearly two decades ago, and TDR means Asda will be back under British ownership for the first time since 1999, when Walmart paid 6.7 billion pounds for the business.

The new owners said that they would look to drive growth at Asda by expanding its presence into smaller neighbourhood shops from its primarily large supermarket format, bringing it more in line with larger competitors Tesco and Sainsbury’s which offer both.

The two brothers said they planned to take their experience with EG Group, which included a convenience business and brand partnerships, to help grow Asda.

“After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK,” they said.

Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board. Chief Executive Roger Burnley will continue to lead the company.

The new owners will invest more than 1 billion pounds in the next three years in Asda to keep prices low and to protect its supply chains, it said.

While Asda’s sales have increased during the COVID-19 pandemic, the chain has still lagged Sainsbury’s, Morrisons and market leader Tesco.

Walmart expects to record a non-cash loss of about $2.5 billion this fiscal year due to the sale of its British supermarket chain Asda, the retailer said.

Walmart earnings are expected to be diluted by about 25 cents per share in the first full year following the completion of the transaction - expected in the first half of fiscal 2022, the company said in a regulatory filing.

Meanwhile, Walmart is in talks with India’s Tata Group for an investment of up to $25 billion in the Indian conglomerate’s planned “super app”, the Mint newspaper reported on Tuesday, citing people familiar with the matter.

The app, scheduled to be launched in India in December or January, will tie in all of Tata’s consumer business, including healthcare, grocery, insurance, fashion and electronics, the report said.

Walmart has hired Goldman Sachs as the banker for the proposed deal that could be run as a joint venture managed by Tata and include offerings from Walmart’s Flipkart, the paper said.

“Walmart is keen to get a strong brand backing its e-commerce business, while Tata group wants a global name and an established player in the online space... to be able to compete against Reliance Industries’ Jio Platforms and Amazon,” a source said.

Separately, Bloomberg News reported that the Tata Group, whose listed companies have a combined market value of $160 billion, is in discussions with potential investors about stakes in its digital platform.

Walmart did not respond to a Reuters request for comment, while Tata and Goldman declined to comment.

If the deal goes through, it could mark Walmart’s biggest investment in the country, topping the $16 billion the US-based retailer paid for a 66% stake in ecommerce company Flipkart.

Walmart, Amazon and Reliance Industries, controlled by Asia’s richest man Mukesh Ambani, have all made bold bets on India’s booming e-commerce market, which Goldman Sachs has estimated to be worth $99 billion by 2024.

They have targeted a growing population of tech-savvy shoppers, luring them with discounts, free returns and easy exchanges.

“Tata already has a good reputation for its products and Walmart’s advanced technology and experience in the space will help with better distribution,” said Rajiv Frank, marketing and brand consultant at New Delhi-based Brandtrotter.

GOOGLE LAUNCH: Google has postponed the Australian roll-out of News Showcase citing regulatory complications, just three months after announcing the product, as the US internet giant grapples with one of the most audacious attempts to police its activities.

After naming Australia, Germany and Brazil as markets where it would start paying publishers to feature their news, the Alphabet unit dropped Australia from the product’s launch this week because its antitrust body has since pushed for laws forcing Google to pay royalties for content industry-wide.

Google said it has therefore “paused” contracts with five local publishers whose news was due to feature on News Showcase, which presents content on swipeable cards it dubs story panels.

“As we work to understand the impacts of the news media bargaining code on partnerships and products, we have put this project on pause for now,” Google’s managing director for Australia and New Zealand, Mel Silva, told Reuters in an email.

“Although our concerns about the code are serious, we hope they can be resolved so we can bring News Showcase to Australia soon,” Silva said.

The delay represents a snag in a strategy widely seen as an effort by the tech heavyweight to show it could work with media companies as governments worldwide, led by Australia, look to new laws to make the firm pay for content on its search engine.

Overnight, Google said it would pay $1 billion to publishers globally for their news over three years, an initiative some industry bodies have said gives it too much sway over terms of royalty payments without involving the law.

Reuters