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DEALMAKERS By Ged Henderson
IN ASSOCIATION WITH:
EASING
Much like the rest of the year, the back end of 2023 saw the Issa brothers and their dealmaking activities making news headlines.
It proved to be a busy year for the brothers and as it came to a close their Blackburn headquartered EG Group announced it had entered into a “definitive agreement” to sell all its 218 KFC franchise restaurants in the UK and Ireland to Yum! Brands’ KFC Division.
The sale is expected to complete in the first half of 2024, with proceeds used to repay debt.
No figure has been put on the deal, the latest in 12 months of serious activity to reduce the global forecourts and food service operator’s debt burden.
To that end, the transaction agreed by EG Group – the largest KFC franchisee in the UK and Ireland – was described as an additional step in its “successful deleveraging strategy” and evidence of continued progress towards putting in place a “sustainable capital structure”.
Zuber and Mohsin Issa, co-founders and chief executives of EG Group, said: “We are proud to have been a strategic partner of KFC in the UK and Ireland, playing an important role in helping the brand expand its footprint.
“Now is the right time to hand the baton to the KFC leadership team to continue to grow the brand in the UK and Ireland.
“This is the latest transaction in our significant deleveraging this year to put in place a sustainable capital structure for the group.”
As part of that strategy, at the end of October the retail and petrol forecourt business completed the sale of its UK operations to supermarket group Asda, which is co-owned by the brothers, in a £2.07bn deal.
THE BURDEN
It said proceeds from the transaction would be used to repay EG’s debt, “significantly reducing net leverage” and enabling $3.2bn of loans to be extended to February 2028. The business revealed it had also secured a new $500m loan, with further refinancing to follow.
Commenting on the deal at the time, Zuber Issa said: “Following this transaction and the successful extension of the debt maturities to February 2028, EG Group will benefit from a sustainable capital structure from which to build for the future.”
The group said it would continue to operate in the USA, Australia, Germany, France, Italy, the Netherlands, Luxembourg and Belgium as well as at 32 sites in the UK.
Lord Stuart Rose, in his role as chairman of EG Group, described the transaction as an important milestone for both companies.
He said: “EG Group can focus on international growth underpinned by its strengthened balance sheet, whilst Asda can accelerate its convenience rollout on proven, well-invested sites.
“There is now a clear opportunity to grow and build the international business whilst ensuring EG plays a pivotal role in the energy transition.”
The activity to reduce EG Group’s debt burden also saw a deal in August to sell 63 of its stores in Kentucky and Tennessee.
They have been acquired by NASDAQ-listed Casey’s General Stores, which has said it intends to retain all the stores’ employees.
Earlier, in March, EG had announced plans to sell and lease back more than 400 of its US sites in a transaction worth $1.5bn. Those assets represented around 15 per cent of EG Group’s total freehold property. Again, the
Zuber and Mohsin Issa money raised was used to cut the debt burden.
The portfolio in question is located on the east coast of the USA and is made up of 415 store assets under the Cumberland Farms, Fastrac, Tom Thumb and Sprint brands. EG America said it would continue to operate the sites.
The buyer was Realty Income Corporation, which is listed on the New York Stock Exchange and is an S&P 500 company. It currently owns around 12,200 real estate properties primarily under long-term net lease agreements with commercial clients.
On the back of all this activity, EG Group’s third quarter trading update in November declared the business, based in Waterside in Blackburn, was “making significant progress” in repaying and reducing its total debt.
The figures showed the completion of the sale to Asda along with the US deals had brought its total debt repayment in 2023 to around $4bn. The statement declared: “The group remains committed to further deleveraging.”
The Issas added: “On 27 November, we achieved an important milestone by addressing all our remaining 2025 maturities through successfully completing our refinancing activities.
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