海角视频

For any entrepreneur no matter where they started from, buying a huge brand like Asda or Leon is nothing short of a remarkable feat.

For a pair who built up their fortune after starting out from a single petrol filling station in Bury, doing so is something else entirely.

Most will now be familiar with the EG Group鈥檚 vast portfolio of almost 400 forecourts. Dotted along the nation鈥檚 A and M-roads and often containing branches of Starbucks, Sainsbury鈥檚, Greggs and Spar, they are a staple - and often the preferred - comfort break location of choice for many motorists.

Over the past year, the story of brothers Zuber and Mohsin Issa and their firm EG Group has caught the attention of the nation as they attempt to go where few before them have been.

Because what began as a humble petrol forecourts business has now grown into a global empire and a private fortune worth billions for the Issa brothers. Each is now thought to have a net worth of 拢3.56bn, and they were even recognised with a CBE for services to business and charity in last year鈥檚 Queen鈥檚 Birthday Honours.

That鈥檚 of course because last year, the brothers, together with private equity firm TDR Capital, bought supermarket giant Asda for 拢6.8bn, adding to its portfolio of KFC, Greggs and Starbucks franchises, and forecourt offerings in the US, Australia, Germany and Italy.

Last week, the Blackburn brothers were at it again, swooping for fast food chain Leon. They are reportedly close to agreeing a takeover deal for Caffe Nero too.

Following their rapid growth by way of debt-funded acquisitions, their empire is now estimated to bring in 拢25bn in revenues each year.

So what does it all mean? How have the pair achieved such astonishing results, is their growth sustainable - and where next?

BusinessLive spoke to a selection of retail experts, local business leaders and national commentators about the brothers鈥� meteoric rise - and where they might go next.

From Lancashire to Leon

Miranda Barker is CEO of the East Lancashire Chamber of Commerce - an organisation that has had the Issa brothers on its radar for longer than most.

Ms Barker, who has been aware of EG Group for years, working alongside its employees on numerous occasions, described the brothers as a 鈥渞eally strong success story鈥� for both her region and the 海角视频 as a whole.

She said one of their best qualities was their 鈥渁bsolute鈥� aversion to 鈥渂lowing their own trumpet鈥� - an assertion backed up by their refusal to give any media interviews at the moment.

鈥淭hey are extremely quiet and extremely media invisible in terms of trying to make something look showy,鈥� she said.

鈥淭hey have just quietly beavered away and worked on some really significant-size deals in a very ethical way that's really managed their workforces, and created a solid product.

鈥淭hey鈥檝e really learned by looking at the market, what the market can take and what the market wants in certain areas.

鈥淚 think we at the chamber probably first saw them at least a decade ago - but I suspect that the local, ingrained Blackburn business people will have seen them from a long time earlier than that.鈥�

So is it a surprise to see such a resounding success story - that started from truly humble beginnings?

Ms Barker said: 鈥淚 think they continue to surprise us, in many ways.

鈥淔rom buying one petrol station to creating something that was superbly professional in the market, and really taking the logic of colocation of services within an individual service station rather than services, is truly remarkable. So that was the first surprise.

鈥淏ut then I suppose that the future departure and the aspiration they had of going into Asda - that was also a huge surprise.

鈥淚 think now we're looking at these new rumours [including the possibility of buying Caffe Nero] and going 鈥榶eah - why wouldn't they?鈥� because it鈥檚 now to be expected from these two in terms of their strategy. So I suppose we're becoming less surprised - but no less proud.鈥�

Frank McKenna, CEO and group chairman of lobbying organisation Downtown in Business, echoed Ms Barker鈥檚 sentiment, praising the firm for its rise to international prominence.

He said: "It's great to see a North West business doing so well, especially one that has grown from very humble beginnings.

鈥淲hilst much of their acquisitions are based on borrowing, there is no reason why this cannot lead to further success if they manage their new businesses as successfully as they've managed their existing ones.鈥�

Mr McKenna said although some of the businesses they are buying look 鈥渧aried鈥�, the reality is that there is a 鈥渃lose fit鈥� between all of them.

He explained: 鈥淧etrol stations are strongly linked to supermarkets, fast food and coffee shops, plus Leon also has an in-store brand now.

鈥淭hey might well consolidate some of the franchises that they have and convert everything to the brands they actually own. It could make great market sense.鈥�

Asda and Leon: a match made in heaven or a square peg in a round hole?

Independent investment group Shore Capital described the deal for Leon, which has 70 海角视频 sites - as 鈥渧ery interesting鈥�, not least as it confirmed the 鈥渋mmense ambition鈥� of EG鈥檚 owners.

The deal was worth around 拢100m - 20 times the firm鈥檚 EBITDA - and funded by debt, with the brothers now believed to be considering the possibility of bringing labels into Asda - to create a broader shopping experience.

In its analysis of the deal, it added: 鈥淭hat ambition is set aside by a low fear factor of debt markets, noting the relatively low equity participation by the new owners into the Asda deal and the corresponding material issue of 鈥榡unk鈥� debt.

鈥淪uch debt for the supermarket chain rests alongside a notable mountain of leverage in the broader EG Group, the organisation executing its ambition in the near zero interest rate environment; leverage ratios that would not be entertained, it should be said, by equity capital markets.鈥�

So are Asda and Leon a 鈥渕atch made in heaven鈥�? Shore said it would 鈥渨atch with interest鈥� to see whether Leon could become one of those brands that begin to appear inside the supermarkets - but said pairing the two may not be so straightforward.

The analysis said: 鈥滻s this one of the consumer brands that the group talks about in bringing labels to the Asda chain, to drive footfall and utilise what is in this day and age surplus footage?

鈥淲hilst we would not wish to be too precious about brand reputations and positions, Leon and Asda may just be a bit of a square peg in a round hole; Asda鈥檚 core customer base may balk at the Leon price file, noting the latter鈥檚 predominance of stores in London and the South East of England. We can imagine the Leon brand, however, working well in selective forecourt locations in the 海角视频 and maybe further afield, including drive-thru sites.鈥�

It added that it鈥檚 difficult to predict how the EG Group will fare in the 海角视频鈥檚 food and drinks market.

鈥淲hilst so, it is becoming increasingly relevant across the 海角视频 retail and food and beverage - and we shall watch with interest to see how the brands and labels fuse in future years.

鈥淲hether the leverage soaked activity proves to be the right model for sustainable business remains to be seen, one cannot argue though that it has been a failure to date. Whatever the outcome, it is going to be full of energy and entrepreneurship, for which two Blackburn brothers deserve a lot of credit.鈥�

鈥楢 destination shopping experience鈥�

Daniel Burke, partner at tax, accounting and business advisory firm Blick Rothenberg, had slightly more faith in the move to buy Leon, and said he believed Asda will now become a 鈥渄estination shopping experience鈥� following the acquisition - to the benefit of customers.

He said: 鈥淓G is no stranger to food outlets. They own more than 6,000 petrol stations across 10 countries, and have been installing Starbucks, KFC, Burger King, Greggs, Cinnabon and Subway branches at their forecourts.鈥�

Mr Burke admitted that Asda and Leon 鈥渁re not two businesses you would expect to come together鈥� - but added: 鈥淚t is clear that Asda are looking at providing a new customer experience.

鈥淚 would expect Asda to follow this up with more acquisitions or partnerships in order to make Asda a 鈥楪o To鈥� place for all of your shopping needs.鈥�

Going even further beyond that assertion, Mr Burke added: 鈥淎sda may well become the bricks and mortar equivalent of Amazon. A place where you can go to buy anything you need.

鈥淭his is part of a wider trend in the retail sector where larger players are acting as 鈥榲irtual department stores鈥� for a number of brands.

鈥淭he attraction for the established retailer is younger/innovative brands while the new brands get access to an established distribution network.鈥�

The Asda deal alone included 拢3.5bn of new debt, including bonds and a 拢749m loan, with the EG Group's debt in last year's accounts standing at around 拢7bn.

So with most of the firm鈥檚 deals having been funded by loans, can that be a sustainable strategy for such a rapidly expanding portfolio?

Dr Charles Knight, associate dean at Salford Business School at the University of Salford, said this type of leveraged buyout is 鈥渜uite common鈥� - but that the amount of new equity they have put in is 鈥渧ery low鈥�. The average amount in Europe is 50% for new equity, however EG Group鈥檚 amounts to more like 12%, he said.

Dr Knight said: 鈥淚t can be sustainable if the business continues to generate cash to service cheap debt but can push it in the danger zone due to unforeseen circumstances - Debenhams for example was a victim of this approach.

鈥淪ome analysts are worried that EG has too much debt pledged against its property portfolio.鈥�

He added: 鈥淭he core theme in the brothers' rapid rise is looking at situations people think are risky and taking the calculated gamble.

鈥淭he logic is going to be that as the economy comes out of lockdown and claims of a 'roaring twenties' boom that this is going to pay off. Having said that, if Walmart was unsuccessful with Sainsbury what do the brothers know that they don't?"

Concerns over debt levels

Dr Knight said the potential purchase of Caffe Nero would not be to the detriment of the brand鈥檚 monopoly of Starbucks franchises up and down the country.

He predicted the two offerings would 鈥渃omplement鈥� one another - depending on location and consumer preference.

Bryan Roberts, a retail expert who runs consultancy firm Shopfloor Insights, said there had been 鈥渟ome concerns鈥� raised over the levels of debt incurred during the group鈥檚 acquisition spree.

But he said: 鈥淚t's worth remembering that EG Group is profitable and that Asda throws off a lot of cash that will help service the debt.

鈥淥ne valid worry is over how they balance servicing their debts with the levels of investment required to continue expanding and making sure that Asda and other businesses are kept up to speed in highly competitive markets.

鈥淭he main expansion is through the imminent acquisition of Asda which has - like other supermarkets - seen robust sales but higher costs during the pandemic.

鈥淧ost-pandemic, Asda will continue to perform solidly so is fairly low risk. The fuel side of their business has obviously suffered during Covid, but the company is hopeful that this will recover.鈥�

Mr Roberts also said he expected that EG service stations - frequently occupied by Starbucks and Sainsbury鈥檚 franchises - could now change quite dramatically in appearance.

He explained: 鈥淚 think that the motivation for acquiring several of these brands is that owning your own retail and food concepts is typically more profitable than operating as a franchisee as you can avoid franchise fees and royalties.

鈥淭hat logic would suggest that we will be seeing Asda replacing Sainsbury's and SPAR in retail and Nero, if they do acquire it, replacing Starbucks in coffee.

鈥淟eon will definitely work on forecourts and it's worth remembering that it is also a grocery brand in its own right.鈥�

So where next for these Blackburn-based business powerhouses?

In Mr Roberts鈥� view, the brothers will be looking to act quickly, as they have done before - and capitalise upon firms facing struggles due to Covid.

鈥淭hey will probably be minded to cast an eye over foodservice and restaurant brands that may be under some stress thanks to the pandemic.

鈥淭hese can be folded into existing EG fuel sites as well as Asda supermarkets and would be theoretically more profitable than operating franchised brands.

鈥淔urther acquisitions of petrol station networks around the world are also highly likely.鈥�

Salford Business School鈥檚 Dr Knight agreed, saying it was clear that the group expects a 鈥渟ocial boom鈥� - with consumers wanting to 鈥渟pend on social experiences鈥�.

He predicted: 鈥淲e might see a few more pick-ups in these sectors in coming months and likely another middle-market chain in distress.

鈥淎longside their ownership of KFC and Greggs franchises, it gives them a foothold in different areas of the market and to different consumer groups.鈥�

The experts who spoke to BusinessLive were also asked about the Issa brothers鈥� single best business attribute - and their views included their ability to improve standards in roadside retail by bringing together well-known brands, their speed and ability to assess risk and pull off complex deals quickly, and their intricate understanding of what a market in a certain geography wants.

Ms Barker summed up: 鈥淚 think they鈥檝e always had long-term plans to make acquisitions like this in this direction of travel.

鈥淭hey鈥檝e learned at each step what worked and what didn鈥檛 work, so this hasn鈥檛 been rushed.

鈥淭hey鈥檙e playing the long game, and Covid and Brexit are relatively short disruptions which may mean short-term depressions.

"But their various array of products and places in terms of Leon and Asda are ultimately sustainable business products and pretty bulletproof."