Private equity firm Lone Star quits race to buy Asda
US private equity firm Lone Star Funds has abandoned the bidding war over British supermarket giant Asda, leaving rival asset manager Apollo as its likely suitor.
The two private equity firms entered a showdown for the UK’s third-biggest grocery chain last month, after US owner Walmart opened bidding for a majority stake in Asda.
The companies hired retail veterans Rob Templeman and Paul Mason to head up the bidding war. Templeman, the former Debenhams chief executive, had teamed up with Apollo, while Mason, who served as Asda’s boss 20 years ago, was helping Lone Star.
However, Lone Star is understood to have dropped out of the race after failing to meet price expectations set by Walmart, the Telegraph first reported.
Walmart, the world’s largest retailer, was forced to place Asda up for auction after merger talks with Sainsbury’s were blocked by the competition regulator last year.
The Competition and Markets Authority warned that the tie-up, which would have created Britain’s largest grocer by market share, would be “expected to result in a substantial lessening of competition”.
Asda enticed a valuation of £7.3bn under the failed mega-merger talks with Sainsbury’s, however it is thought a private equity takeover will fail to attract as high a price tag.
It is unclear whether UK-based TDR Capital, a third private equity firm, is still in the running for a takeover bid.
Walmart is expected to retain a minority stake in the grocery chain once a sale is completed.
In second quarter results released last month, Asda saw like-for-like sales slip 0.3 per cent despite demand for groceries skyrocketing during the pandemic.
Slow sales in its non-US retailers drove down Walmart’s gross profit rate in the UK, and hammered its international operating income by almost 30 per cent in the second quarter.
Asda declined to comment.