Walmart : Revives Plan to Sell Stake in U.K. Grocery Chain -- Update

By Cara Lombardo, Sarah Nassauer and Ben Dummett

Walmart Inc. has relaunched the planned sale of a majority stake in its U.K. grocery-store chain Asda Group Ltd. after putting the process on hold in April to focus attention on managing its operations through the pandemic.

The U.S.'s largest retailer has invited potential buyers to submit offers for its U.K. business, according to people familiar with the situation. The Asda business was valued around $9 billion in 2018.

"Walmart and Asda have restarted conversations with a small number of third-party investors who are interested in acquiring a stake in Asda," said a Walmart spokesman Monday.

Current bidders couldn't be learned. But private-equity firms such as Apollo Global Management Inc., Lone Star Funds and TDR Capital LLP had previously vied to acquire a majority stake of Asda and are likely to take another look, some of the people familiar with the situation have said.

Walmart's decision to remount the sale attempt comes at a time when the grocery sector is hot. The coronavirus pandemic has shifted shopping habits, with more consumers focused on buying just essentials such as food or ordering online, resulting in a surge in sales. To take advantage of this growth, Albertsons Cos., a Walmart competitor in the grocery sector, went public last month. Its shares slipped on their first day of trading after pricing below expectations and are little changed since.

Walmart had said in February that it was considering a possible stake sale of Asda after receiving interest from potential bidders. But the fallout from the coronavirus outbreak forced the supermarket giant during the past few months to prioritize meeting the surge in demand for food basics amid the pandemic lockdown over the possible Asda sale.

In the U.S., where Walmart does the bulk of its business, the retailer has hired more than 400,000 additional store and warehouse workers since mid-March, while Asda has brought on at least 22,000 new employees to help keep shelves stocked with ground beef, toilet paper, cleaning supplies and other products.

But Walmart said in May that it is well positioned to manage through the crisis, signaling that the pressure on its operations is easing. At the same time, the launch of the Asda sale now allows the Bentonville, Ark.-based retailer to take advantage of strong demand for groceries to try to achieve a high sale price. The challenge will be convincing potential buyers that current demand is sustainable after the pandemic passes.

A sale would mark Walmart's latest move to reorganize its international operations by retrenching from challenging markets in favor of bets on the growth in online services in other countries.

Walmart previously tried to sell Asda to rival U.K. supermarket operator J Sainsbury PLC in 2018, as it was working toward buying India's Flipkart Group for $16 billion. The Sainsbury deal would have valued Asda at GBP7.3 billion ($9 billion), but U.K.'s competition watchdog blocked the deal last year, concerned it would reduce competition and potentially spur higher prices for shoppers.

Asda ranks among the U.K.'s biggest supermarket retailers along with Tesco PLC, Sainsbury, and discounters Aldi and Lidl.

A private-equity buyer is less likely to face scrutiny unless they own a business that already ranks among the market's biggest operators.

The possible Asda sale is the latest auction to come back to life as economies start to emerge from the pandemic. Marathon Petroleum Corp. has renewed discussions with potential buyers for its Speedway gas-station unit, the Journal reported.

Write to Cara Lombardo at [e-mail], Sarah Nassauer at [e-mail] and Ben Dummett at [e-mail]