A UK petrol station business founded 15 years ago with a single site in Manchester is to become the largest independent fuel retailer in the EU, with annual sales of €6bn, through a merger arranged by TDR Capital.
Euro Garages, which is majority owned by the Issa brothers from Blackburn, plans to merge with European Forecourt Retail Group, forming a business with 1,467 sites mainly in the UK, France and the Benelux countries.
Private equity house TDR, which is behind the move, owns EFR and took an undisclosed minority stake in Euro Garages last year that valued the business at £1.3bn.
Tony DeNunzio, the former chief executive of UK supermarket chain Asda, will become chairman of the merged business, which will be called Intervias.
Mr DeNunzio said the prospect of the UK leaving the EU had not affected the deal. “We don’t believe Brexit will have any impact on our company,” he said. “We still have a high degree of confidence in both the UK and continental EU markets.”
Euro Garages has 350 sites, which it has acquired as oil majors such as Exxon and BP have retreated from forecourt retailing. But it has sought to diversify its revenue streams away from fuel sales — which tend to be low margin and volatile — and into groceries and fast food. It already has retail deals with the food chains Starbucks, Subway, Burger King, Spar and Greggs. Similarly, EFR has retail agreements with supermarkets Carrefour and Louis Delhaize, coffee brand Lavazza and its own Go Fresh brand.
EFR and Euro Garages will continue to operate under their own names after the merger and will retain their separate chief executives and senior leadership teams. However, taken together, the merged group will be one of the biggest independent forecourt retailers in Europe, with about 8,500 employees and €6bn in annual revenue. About €4bn of this is expected to come from EFR, but the business does not publish detailed accounts as it is a private company.
Euro Garages reported £804m in revenue for the year to July 31 2015 and made £34.8m in pre-tax profit. It increased its non-fuel sales to £141m from £106m the year before.
Mohsin and Zuber Issa, the sons of Asian immigrants, will own 50 per cent of the combined entity, with TDR holding the rest.
Mr DeNunzio said the businesses had complimentary strengths. Euro Garages brought retail expertise, he argued, while EFR offered a more efficient fuel buying and distribution operation. “One of the big benefits of the merger will be rolling out food to go at EFR,” he said. “Euro Garages sites have become retail destinations.”
In terms of petrol stations, Intervias will have 3 per cent of the UK market, 2.7 per cent in France and 10 per cent in the Netherlands. Its closest independent rival in Europe will be DCC, with 825 sites. They supply fuel to another 1,900.
Both companies have substantial debt. Euro Garages has a £745m facility and EFR €655m. Moody’s, the rating agency, this year gave both entities a B2 credit rating, and noted their “highly leveraged financial risk profile”. Mr DeNunzio said they still had the financial firepower to buy more forecourts.
But he said Euro Garages’ policy of not selling alcohol would not be extended to the continent, where beer and wine are staples of motorway service stations.
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