Walmart Inc. (NYSE:WMT) has reached an agreement for the sale of its majority stake in U.K. retail chain Asda. The sale is to private equity firm TDR Capital, in a transaction worth $8.8 billion. The sales come two decades after the U.S. retailer paid close to $10.8 billion, at the time, for a majority stake.
Asda Sale
After the sale, the U.S. retailer retains a minority stake in the U.K. retailer and a seat on the board. The sale comes barely a year after Walmart failed on a $10 billion bid to merge Asda with Sainsbury. European antitrust authorities blocked the merger on concerns that the combined company will result in a retail chain wielding too much power in the industry. There were concerns that the resultant retailer would wield too much power, conversely stifle the much-needed competition in the industry.
An $8.8 billion deal allows the U.S. retailer to recoup a substantial amount of money it paid for the U.K. retailer a decade ago and still retain some stakes in the company. Walmart will also remain as a strategic partner.
TDR Capital gains hold of Asda with more than 600 stores across the United Kingdom. The retailer also owns 18 gas stations and employs close to 145,000 people serving close to 18 million people weekly. The private equity firm has promised to invest $1.3 billion in Asda over the next three years following the Walmart stakes' acquisition.
Changing Retail Landscape
The acquisition comes at a time when online shopping appears to have taken over as the preferred mode of shopping owing to COVID-19 challenges. Asda has had to ramp up operations on the e-commerce front as it looks to ramp up sales to change consumers' shopping patterns.
For Walmart, the sale is part of a plan to reduce its exposure to the European market. The retailer has been trimming its exposure, having faced stiff competition in the region. It has already exited in the German market.
The U.S. retailer has since shifted its attention to the Chinese and Indian market. The two markets offer tremendous upside potential compared to the European market.