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EG Group: building an empire on debt-fuelled growth

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Back in 2018 investors who specialise in the riskiest corporate debt started to notice something unusual. A little known petrol stations business called EG Group was suddenly borrowing money again and again. It was using that money to buy hundreds of petrol stations at a time across Europe and the United States.

Its debt more than quadrupled in just a couple of years. It seemed audacious at the time. Looking back it was paving the way for a much, much bigger move that would eventually involve the retail giant Walmart.

Last year EG Group owners bought Asda, a major UK supermarket chain, from Walmart for £6.8bn in what was then Britain’s biggest leveraged buyout since the financial crisis. At this point it’s worth understanding who EG Groups owners’ are.

They’re two billionaire brothers and a secretive private equity firm. The brothers, Mohsin and Zuber Issa, were raised in a small terraced house in Blackburn in northwest England. And they started out working on their dad’s petrol station on the outskirts of Manchester.

All of their debt-fueled deal-making has turned their company from a single site to a sprawling empire which operates in 10 countries, plus 44,000 staff and 20 billion euros in annual revenues. And the private equity firm, TDR Capital, is made up a small group of deal makers based near Mayfair who typically 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’ve been among the big winners from a decade of low interest rates, which has allowed their model of debt-fueled growth to thrive. That’s because more and more investors are willing to buy the riskier debts of companies like EG Group as they search for higher returns.

Neither the brothers, nor TDR, have any experience of running a big supermarket chain. So the question now is, having pulled off the biggest deal yet, what will it do with Asda?

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