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One of the billionaire co-founders of EG Group has called for the petrol station giant to explore a sale of its $5bn-plus US business, offering up an alternative to private equity backer TDR Capital’s plan for an initial public offering of the entire business.
Zuber Issa, who retains a 25 per cent stake and a seat on the board of EG after stepping down as its co-chief executive last year, told the Financial Times he wants EG to pursue a sale of its US business to reduce debt.
“There are people who want to buy the US assets,” said Zuber in an interview at EG’s global headquarters in his hometown of Blackburn, Lancashire. “It will be an auction process which would get to a clear end goal much quicker [than an IPO] and we can pay the debt off.”
The comments mark a rare public intervention from Zuber and suggest a divergence of opinion with TDR on the best way to exit what has been a highly successful investment.
EG was formed by the 2016 merger of Euro Garages, the forecourt business built up by Zuber and his brother Mohsin, with TDR’s European Forecourt Retail Group.
The end of the low interest rate era curtailed years of debt-fuelled expansion and forced EG into selling assets to reduce leverage. The group’s net debt now stands at $5.3bn, equivalent to almost five times last year’s adjusted earnings.
EG is 50 per cent owned by London-based buyout group TDR, with the remainder split between the Issas. The brothers sit on EG’s nine-strong board as non-executive directors, alongside two TDR representatives.
The group has more than 5,500 sites across nine countries and generated revenues of $24.2bn last year.
EG has been working towards an IPO in the US for several months, a process which could involve selling some of its European assets beforehand, the FT previously reported. That would pave the way for TDR to begin exiting its investment, potentially around the middle of next year.
“The shareholders are still thinking about the options,” Zuber said. “Other options would be trying to sell the US in its entirety. And I think that should be an option we should do”.
Zuber said a sale is attractive because there are comparable businesses in the US market for valuation purposes, and a disposal would leave the wider group with leverage of about three times earnings. EG’s US business made adjusted profit of $449mn last year, just under 50 per cent of group profit.
In its period of rapid growth EG attracted scrutiny over its corporate governance. Addressing the controversy around the Issas’ decision to buy two private jets using interest-free loans from EG, Zuber said that while the planes were for business use, he and Mohsin were advised to register them in their own names.
“When you go into the US all the businesses have jets, especially in our sector,” he said. “But there’s a taboo here in the UK, unfortunately.” He added that the loans had been paid off.
The partnership between the Issas and TDR deepened in 2021, when they teamed up on the £6.8bn acquisition of Asda, the UK’s third largest supermarket chain.
Under their ownership Asda has lost market share to rivals and growth plans have fallen by the wayside.
Zuber acknowledged the brothers underestimated the strength of the competition, particularly from discounters Aldi and Lidl. He sold his 22.5 per cent stake in Asda last year to TDR, handing the buyout group majority control.
As part of the separation Zuber also stepped back from running EG, buying more than 30 UK forecourts from the group in the process.
The deal provided the foundation of his new venture, EG On The Move, which he has subsequently grown via acquisitions to an estate spanning around 400 locations across the UK.
EG On The Move replicates the formula that made EG successful — adding modern convenience stores and outlets from brands such as Greggs and Starbucks to its forecourts.
Zuber wants to expand the business, which generates annual earnings before interest, tax, depreciation and amortisation of more than £100mn, to a size where it is making £500mn. The entrepreneur said he is considering deals in Europe.
“The plan [is to] leave a legacy behind for the family who hopefully will take on and run this business going forward,” he said. “I’m a great believer in ‘stick to what you know’.”
Zuber said he would be open to working with private equity on his new venture but that he would seek to retain control in any deal.
“One of the things which we’ve learned . . . is that it’s quite easy to borrow the money, but as interest rates go up there is always going to be a squeeze on free cash,” he said.
“If you want to have the growth of PE and . . . you want an exit at some time, that’s really good, [but] when . . . you want to keep it in the family, then private equity is not for you because you will lose control”.
