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UPDATE 2-Britain's Asda ends Walmart era on the up

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James Davey
·2 min read
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* Christmas quarter same-store sales rise 5.1%

* Issa brothers and TDR have bought majority holding in Asda

* Deal still requires approval from competition regulator(Adds detail)

By James Davey

LONDON, Feb 18 (Reuters) - British supermarket group Asdaended its 22 years under Walmart ownership withaccelerating underlying sales in the Christmas quarter, drivenby strong demand for premium ranges.

Asda, now owned by the Issa brothers and private equitygroup TDR Capital, on Thursday reported a 5.1% rise insame-store sales over the three months to Dec. 31 - animprovement on third-quarter growth of 2.7%.

All of Britain's major supermarket groups performed stronglyin the Christmas period, with coronavirus restrictions closingthe hospitality sector and forcing many people to work fromhome.

"Asda’s growth during the period was driven by a notableshift in shopping behaviour, with customers trading up andspending more on premium categories at Christmas to treatthemselves after a difficult year," it said.

Asda highlighted December sales of premium lines up 30% yearon year and a 76% jump in online sales during the quarter.

The billionaire brothers and TDR completed the purchase of amajority holding in Asda from Walmart on Tuesday in a dealgiving it an enterprise value of 6.8 billion pounds ($9.5billion).

The deal still requires regulatory approval, with theparties subject to an enforcement order from the Competition andMarkets Authority (CMA) to ensure Asda continues to operateindependently from its buyers while it conducts itsinvestigation.

The CMA has set an April 20 deadline for a ruling. Thebrothers and TDR have said they "remain confident" of a positiveoutcome.

The brothers and TDR are contributing only 780 millionpounds, with the rest of the deal financed through 3.5 billionpounds of debt, the sale of Asda's 322 petrol forecourt sites totheir own EG Group for 750 million pounds and the sale of itsdistribution centres.

While the brothers and TDR have called the capital structure"robust", some within Asda are uncomfortable with the level ofdebt, which is higher than rivals, and the planned sale of thepetrol stations, said one source with knowledge of thesituation.

The brothers have pledged to invest more than 1 billionpounds in Asda over the next three years.

Walmart will retain an equity investment in Asda, with anongoing commercial relationship and a seat on the board.

(Reporting by James DaveyEditing by Sarah Young and David Goodman)