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In 2018, investors specializing in the most risky corporate debt began to notice something unusual. A little-known gas station company called EG Group suddenly borrowed money again and again. It was the use of that money to buy hundreds of gas stations at a time across Europe and the United States.
His debt has more than quadrupled in a matter of years. It seemed daring at the time. Looking back, it paved the way for a much, much bigger move that would eventually involve retail giant Walmart.
Last year, EG Group owners bought Asda, a large British supermarket chain, from Walmart for £ 6.8 billion in what was then Britain’s biggest leverage buyout since the financial crisis. At this point, it’s worthwhile to understand who EG Groups’ owners are.
They are two billionaire brothers and a mysterious private equity firm. The brothers, Mohsin and Zuber Issa, were raised in a small house in Blackburn in the North West of England. And they started working at their father’s gas station on the outskirts of Manchester.
All of their debt-fueled transactions have transformed their company from a single site to a vast empire operating in 10 countries, plus 44,000 staff members and 20 billion euros in annual revenue. And the private equity firm, TDR Capital, consists of a small group of transactions based near Mayfair, who usually use complicated financial engineering to make as much money as possible.
What they have in common is ambition and a desire to move fast. They were among the big winners of a decade of low interest rates, which allowed their model of debt-driven growth to flourish. This is because more and more investors are willing to buy the more risky debt of companies like EG Group while looking for higher returns.
Neither the brothers nor TDR have any experience of running a large supermarket chain. So the question now is, what made the biggest deal so far, what will it do with Asda?