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Walmart Sells Majority Stake in Asda

U.K. supermarket chain Asda is headed back to British ownership, now that Walmart is selling a majority stake in the company.

Terms of the deal were not disclosed, but the total enterprise value is believed to be in the range of $6.8 billion pounds ($8.79 billion). The new majority stakeholders will be British billionaire Issa brothers and the private equity firm TDR Capital. Walmart will retain an unspecified minority investment. The new owners are planning to invest over 1 billion pounds ($1.29 billion) in the business and help keep prices low, a move that also is expected to help keep its supply chains intact.

The transaction still requires regulatory approval. It is expected to close in early 2021.

Walmart acquired Asda in a surprise move in July 1999 for 6.7 billion pounds ($10.8 billion). It was a deal that some did see benefiting both firms, particularly since Walmart was known across the pond for its “pile it high and sell it cheap strategy.” Walmart currently sells Asda’s George apparel line for its men’s wear offerings.

Charlie O’Shea, Moody’s vice president and senior credit officer, sees news of the Asda sale as a favorable development that “will allow Walmart to continue to refocus its international efforts on markets with more long-term upside, such as India and China.”

“That said,” he added, “Walmart will retain a minority stake, board representation and remain active as a strategic partner via logistics and sourcing.”

Earlier this week, word surfaced that Walmart might be going deeper in its investment in the Indian market. Following its initial $16 billion investment for a 77 percent controlling stake in Flipkart in 2018, and its subsequent $1.2 billion additional stake earlier this year, the American discounter is now said to be in talks with Tata Group for up to a $25 billion investment in a joint venture to build a “super app” that would create a massive one-stop shopping ecosystem.

While full financial terms have not been disclosed, Walmart has acknowledged it will take a non-cash charge of around $2.5 billion, in addition to Asda’s ongoing pension settlement, O’Shea noted.

Walmart did try to sell Asda last year to Sainsbury last year for 7.3 billion pounds ($9.44 billion), but British regulators scuttled that deal.