Walmart Inc. has reached an agreement with an investor group on the sale of its British unit Asda, the companies said Wednesday. The deal, which still needs regulatory approval, is valued at $9.4 billion.
The investors are brothers Zuber and Mohsin Issa, the founders and co-chief executive officers of British convenience store and gas station chain EG Group; and TDR Capital LLP, a U.K.-based private equity firm. The companies said the acquisition is on a cash-free and debt-free basis.
Under the new ownership structure, the Issa brothers and TDR Capital are acquiring a majority ownership stake in Asda. Bentonville-based Walmart will retain a minority stake and a seat on Asda's board of directors.
Asda's current management team, led by Chief Executive Officer Roger Burnley, will remain with the supermarket chain. Asda has about 630 stores throughout the U.K.
Walmart first announced the proposed agreement in October, a month before selling a majority stake in Seiyu, its Japanese unit. Also in November, Walmart sold its business operations in Argentina for an undisclosed sum.
Britain's Competition and Markets Authority, which in 2019 blocked the sale of Asda to rival Sainsbury's, opened its inquiry into the current proposal in December. The authority decides whether a transaction will result in less competition for goods and services within any markets in the U.K.
Walmart and the investors said in a news release Wednesday that if regulators approve the deal, they expect it to be completed in the quarter spanning February through April.
The regulatory agency said in December it expected to announce its decision on the sale by mid-February.
All the U.K.'s leading supermarket chains, which include Sainsbury's and Tesco, have been losing market share as shoppers increasingly turn to discounters such as Lidl and Aldi, according to research firm Kantar.
Brian Yarbrough, a retail analyst with Edward Jones, said the U.K. grocery market is "hyper-competitive," and that Walmart had been losing market share there for several years.
"I think the growth potential there longer term was not worth the investment that needed to be made," Yarbrough said.
And though Walmart's earnings will take a hit in the first year after the sale because Asda was contributing positive earnings, Yarbrough said, "I think most investors would rather see them take that capital and invest it where they see a better long-term opportunity."
Walmart's global strategy, which long focused on expansion, has changed in recent years. The company has pulled out of lower-performing markets to invest more heavily in those where it sees more growth potential -- namely Mexico, Canada, India and China.
Doug McMillon, Walmart's chief executive officer, has repeatedly affirmed this shift in strategy in its international division. While talking with investors in November about the company's third-quarter earnings, McMillon said, "We know where to invest and we'll be aggressive where we should be while taking action in other areas."
Walmart is scheduled to release its fourth-quarter and fiscal year earnings today.