Grocery chain Asda and gas station operators EG are reportedly exploring a $16 billion merger.
That’s according to a Saturday (Jan. 21) report by The Times, which says the merger of the two U.K. companies would create a mammoth retailer worth between $13.1 billion and $16.1 billion, encompassing 581 supermarkets, 700 gas stations, and 100 convenience stores.
The report says the Issa brothers, who own EG and Asda, and London’s TDR capital are considering the deal to help refinance $8.6 billion in debt due in 2025.
The Times also cites comments from Moody’s analyst Roberto Pozzi, who says EG’s operating profits will barely cover its interest expenses, set to balloon to $800 million this year.
A spokesperson for Asda told PYMNTS the company does not “comment on rumor or speculation.”
PYMNTS has also contacted EG for comment but has not yet received a reply.
The news comes a little more than a month after reports that Asda was expanding its Express convenience store concept, part of a larger trend of supermarkets opening smaller-format locations to compete with convenience stores.
As PYMNTS reported in December, Asda plans to open 300 new locations by the end of 2026, with a focus on residential areas where the company has no presence. The new stores will offer essential items, some prepared foods, and alcoholic beverages.
“A key part of our growth strategy is to provide customers with more opportunities to shop at Asda closer to where they live or work,” Mohsin Issa, co-owner of Asda, said in a statement. “With more than three-quarters of the U.K. population visiting a convenience store in the last 12 months, the potential for growth in this market is significant. Our ambition is to become the convenience destination of choice.”
Meanwhile, convenience stores are facing other pressures, as rising competition means they can “no longer afford outdatedness or grunginess,” PYMNTS wrote last week.
The number of convenience stores is rising in the U.S., according to recent National Association of Convenience Stores findings, with many new stores offering a more upscale experience.
In addition, convenience stores are now competing with digitally native players, which means consumers now expect selection, convenience and digital connectivity from their stores.
Research from PYMNTS’ recent study “The Instant Payments Transformation Guide: Grocery, Pharmacy and Convenience Retailers” — which drew from a survey of 300 U.S. and U.K. retailers — found that 77% of merchants, including convenience store owners, viewed digital rewards and coupons as a key to in-store customer loyalty.
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