Manchester-based Co-op Group announced it has sold its petrol forecourt estate to Leeds-based Asda for an enterprise value of £600 million.

The Co-op said the enterprise value of £600 million will include £438 million cash and include IFRS 16 lease liabilities of £162 million.

“This transaction includes 129 petrol forecourt sites, spread across the UK and represents 5% of Co-op’s retail estate of 2,564 stores …” said the Co-op.

Proceeds from the sale will be used to “reinvest into Co-op’s leading core convenience business centred around its retail estate, as well as its growing wholesale, franchise and e-commerce operations, including new convenience stores in the heart of more communities,” said the Co-op.

It said proceeds will also be used to “invest in Co-op’s pricing, store operations, technology, and logistics” and to “support the reduction of Co-op’s net debt.”

Co-op CEO Shirine Khoury-Haq said: “This transaction is in line with our strategy to move away from operating petrol forecourts and supports our vision of Co-operating for a fairer world while building our core leading convenience business.”

The Co-op operates over 2,500 food stores, employs almost 60,000 people and has an annual turnover of over £11 billion.

Blackburn-based billionaire brothers Mohsin and Zuber Issa and private equity firm TDR Capital completed the £6.8 billion acquisition of a majority ownership stake in Asda from Walmart Inc. in 2021.

Walmart retains an equity investment in Asda, with an ongoing commercial relationship and a seat on the board.

Asda said the transaction will be financed through a combination of existing cash resources and bank finance.

“The circa 2,300 colleagues currently employed in the Co-op stores will transfer to Asda’s employment under TUPE transfer following completion and after a transition period,” said Asda.

“The stores being acquired as part of the transaction delivered net sales of £863 million and pro forma EBITDA of £53 million for 12 months to June 2022, with potential to grow EBITDA further when development opportunities and other synergies are taken into account.”

Mohsin Issa said: “We have always been clear in our ambition to grow Asda and are hugely excited to create this new and distinct part of our business, giving us the opportunity to bring Asda value in fuel and groceries to even more customers and communities across the UK.

“We see convenience as a significant growth opportunity for the business. This acquisition accelerates our strategy in this area and forms part of our long-term ambition to become the UK’s second largest supermarket.

“We look forward to welcoming the Co-op colleagues to this new part of our business after we complete the transaction and due processes in the coming months.”

Rothschild & Co acted as financial advisors to the Co-op, with Addleshaw Goddard acting as principal legal advisors.