Asda IPO: what to know and how to buy shares

When could the Asda IPO take place?

Asda was bought by the billionaire Issa brothers and private equity outfit TDR Capital, in a deal worth some £6.8 billion, back in October 2020. The sale was agreed after previous owner Walmart decided to sell its controlling stake after shelving IPO plans, following its failed £7.3 billion merger of Asda with rival Sainsbury’s, which was blocked on competition grounds.

For context, Walmart bought Asda in 1999 for £6.7billion.

As of 1 November 2024, TDR Capital owns 67.5% of the business, having bought Zuber Issa’s shareholding — with 22.5% still held by Mohsin Issa, and 10% by Walmart.

Asda has also just announced that Allan Leighton has been appointed as Executive Chair, replacing Lord Rose who served in the role since 2021. Leighton was previously CEO of Asda for five years from 1996 and may have been brought in to help with a public launch.

For context, TDR Capital has invested £3.8 billion over the past three years into Asda, growing the store footprint from 623 to 1,200 shops. It also launched a loyalty app, which now has six million active customers, accounting for more than half of total transactions.

This progress all evidences that an IPO may be in the pipeline.

How to buy Asda shares if the company lists

If Asda do end up listing in the UK, you can buy their shares from £3 commission with us. That's the rate if you've traded 3+ times in the previous calendar month, otherwise our standard fee is £8.

You'll be able to invest in Asda right away on the day of the listing.

1. Do your research on IPOs
2. Open a share dealing account
3. Search for Asda on our share dealing platform
4. Choose the number of shares or amount of money you wish to invest
5. Place your deal

When dealing shares, you own the stock and become a shareholder in the company. You'll profit if the share price rises above the point at which you bought, or potentially from any dividends paid. You could get back less than you put in.

You can also trade the Asda IPO using leverage through a variety of products with us. This means you could gain or lose money quickly and could end up losing more than your initial deposit. This is higher risk and requires thorough risk management.

Read more about IPOs:

• Upcoming IPOs to watch
• How to trade or invest in IPOs
• Trading IPOs on our platform

What will Asda be valued at and what will the share price be?

In Q3 2024, Asda noted that year-to-date group revenues (excluding fuel) had increased by 0.5% — though quarterly revenues had declined by 2.5% to £5.3 billion. For context, in fiscal 2023 sales rose by 7.1% year-over-year to £21.9 billion, driving underlying profit to more than £1 billion.

In terms of market positioning, Kantar Research indicates that Asda — despite losing some ground to rivals in recent years — remains the third-largest supermarket in Great Britan with a 12.5% market share. Meanwhile, its two larger rivals Sainsbury's and Tesco hold 15.5% and a whopping 27.9% respectively. You might expect Asda to pay a dividend in line with these competitors.

For valuation perspective, in its latest fiscal year Sainsbury’s generated group sales of £36.3 billion and an underlying profit before tax of £701 million. Sainsbury’s has a market capitalisation of circa £6 billion and a share price in the region of 250p — which could indicate a rough valuation for Asda.

It’s also worth mentioning Clayton, Dubilier & Rice’s (CD&R) purchase at auction of Morrisons for £7 billion in October 2021, which currently controls only 8.6% of the grocery market. Despite perhaps overpaying, you might expect an Asda IPO to launch at a higher market capitalisation — and taking Morrisons private may also have left a vacuum in the public markets for Asda to fill.

As a reminder, Asda was last sold for £6.8 billion in October 2020 and has since benefitted from significant investment. However, net debt at the end of Q3 stood at £3.8 billion, and while this has reduced over time, net leverage as a multiple of pro forma EBITDA after rent remains at 3.0x.

What is Asda’s business model?

Asda operates a diverse range of shop formats including massive supercentres, superstores, convenience shops, and specialised ‘Asda Living’ shops focused on non-food and George products. The largest shop is the 100,000 square foot Milton Keynes supercentre, though superstores remain the most common format — and offer services including banking, dry cleaning, fresh food, George clothing, and pharmacy services.

With over 145,000 colleagues, Asda serves 18 million customers weekly across its store formats and online platforms, and continues to maintain its position as the best value traditional supermarket for families, regularly topping the ‘Which? Big Shop’ price comparison survey.

And then there’s its hugely popular Rewards loyalty app, which now accounts for almost 57% of all transactions and has more than 6.8 million regular users since launching in August 2022. Asda’s e-commerce platforms are capable of serving 98% of UK households with features including Grocery Click & Collect, a mobile app with shopping list tools, and integrated recipe browsing.

Apart from the key grocery market, Asda enjoys significant success with clothing brand George, which has quietly become the UK’s the third largest fashion retailer by sales volume. George is also the UK’s market leader in kids wear — a standout success is the ‘Back to School’ range, which accounts for 13% of the market, making George the top school wear brand for families.

On the tech side, Asda's logistics network includes 42 nationwide facilities, managing the delivery of 1.5 billion cases annually. And its biogas-powered fleet is the UK’s largest, with plans in place to expand further. Asda also launched its ‘ToYou’ service in 2015, which provides end-to-end parcel solutions, allowing customers to send, collect, and return parcels through more than 600 stores, with advanced automated systems in select locations.

In short, Asda arguably sports a strong and diversified business model.

Why are there Asda ethical concerns?

In common with its competitors, Asda has come under fire for several ESG missteps, including welfare issues regarding animals in its supply chain, alongside inadequate climate action such as being too slow to phase out HFC refrigerants.

For context, Oxfam ranked Asda as the worst supermarket for workers' rights in 2022, with a score of just 4% for treatment of small-scale farmers. There have also been investigations into worker rights at factories in Asia which produce George clothes, alongside a damaging sex discrimination lawsuit which ended up in the company paying an employee a five figure sum after being assaulted by a colleague.

However, there are similar ethical concerns at its competitors, and maintaining standards is inarguably a challenge as supermarkets deal with some of the longest and most complex supply chains. Asda has also created an ESG program called ‘Creating Change for Better’ which aims to protect the environment, remove barriers to opportunity, and help it operate responsibly.

Asda-related investments

While you wait for the Asda IPO, there are plenty of alternatives to consider. The closest comparator is possibly Sainsbury’s given how close the two companies are in terms of market share, though Tesco is likely the most popular supermarket stock in the UK. Internationally, you can invest in US titan Walmart, which still retains a 10% shareholding in Asda — and Walmart is by far the largest grocer in the USA, with a market share of 23.6% in 2023.

For investors seeking diversification, a popular choice is the Supermarket Income REIT, which invests in a high-quality supermarket real estate portfolio with the objective of providing shareholders with a level of income together with the potential for capital growth.

Asda IPO summed up

• Asda has just announced that former CEO Allan Leighton has been appointed as Executive Chair
• TDR Capital has invested £3.8 billion over the past three years into Asda, growing the store footprint from 623 to 1,200 shops
• FY23 sales rose by 7.1% year-over-year to £21.9 billion, driving underlying profit to more than £1 billion
• With over 145,000 colleagues, Asda serves 18 million customers weekly across its store formats
• Asda’s George clothing brand has become one of the UK’s largest fashion retailers