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Fears £6.8bn Asda takeover could lead to higher fuel prices

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The billionaire Issa brothers, who amassed a fortune with their petrol station business EG Group, are meant to buy Asda, along with private equity firm TDR Capital. Photo: Getty Images
The billionaire Issa brothers, who amassed a fortune with their petrol station business EG Group, are meant to buy Asda, along with private equity firm TDR Capital. Photo: Getty Images

The UK's competition watchdog has said the £6.8bn ($9.5bn) takeover of Asda could lead to higher petrol prices in some parts of the country.

The billionaire Issa brothers, who amassed a fortune with their petrol station business EG Group, are set to buy Asda. The deal is financed by the Issa brothers' long-time parters, private equity firm TDR Capital, through a jointly owned company called Bellis. 

The Competition and Market Authority (CMA) on Tuesday raised concerns about the deal, saying the combination of fuel stations could give the combined business too much power and lead to higher fuel prices in some parts of the country. 

The Issa brothers operate 395 petrol stations in the UK, while Asda owns 323. Joel Bamford, CMA's senior director of mergers, said the parties involved were both "key players in the market".

"The CMA has found that the deal raises local competition concerns in relation to the supply of road fuel in 36 areas across the UK and the supply of a specific type of fuel – called auto-LPG – in a further area," the regulator said. "It is therefore concerned that the merger could lead to higher prices for motorists in these locations."

The Issa brother have five days to offer proposals to the CMA to address the concerns. Bamford said the buyers had to "provide a clear-cut solution" in order to avoid "an in-depth phase 2 investigation."

READ MORE: Billionaire Issa brothers swoop for fast food chain Leon

Last October Walmart (WMT) announced it would sell a majority stake in Asda but retain a stake in the business. The CMA launched a review of the Asda takeover deal on 8 December 2020.

Judith McKenna, president and chief executive of Walmart International, had said at the time that the deal would add “a new entrepreneurial flair, not only to Asda, but also to UK retailing.”

Founded in 1949 in Leeds, Asda is Britain’s third biggest supermarket and makes annual sales of £22bn, but has struggled in recent yeas to compete with German discounters Aldi and Lidl.

Earlier this year, it announced a major restructuring that could see up to 3,000 back office roles disappear, although it said it plans to create 4,500 new roles in online operations.

Last week, it said it had started consulting with more than 1,000 staff over its plans to overhaul its in-store bakeries.

The company said it was treating redundancy as “the last option” during the consultations, which it said was sparked by changing tastes among shoppers.

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