Walmart Plans Path To Asda IPO 20 Years After De-Listing Supermarket

Following the collapse of its proposed merger with Sainsbury’s, Asda-owner Walmart International’s chief executive has told senior employees that the U.S. retail giant is “seriously considering a path to an IPO”. A new public listing for Asda, 20 years after Walmart acquired the supermarket chain for £6.7 billion and delisted it from the London Stock Exchange, will not, however, be fast tracked.

Judith McKenna, CEO of Walmart International, the company unit that controls non-U.S. businesses, is the former CEO of Asda itself. She was in Leeds this week to communicate the company’s plans for the supermarket chain to 1200 senior employees seeking clarity around what the future might hold after the unsuccessful attempt to merge Asda with peer Sainsbury’s. The move was blocked by the UK’s Competition and Markets Authority on the grounds that the combined entity, even if it sold off up to 150 stores across the UK, would mean a reduction in competition in some areas the regulator maintained would not be in the long term interests of customers.

Ms McKenna told the managers and other senior employees who had gathered at Leeds’s First Direct Arena that an IPO was being seriously considered by Walmart but that they should expect a public listing to take a number of years if it does go ahead. It is no secret that Walmart is looking to wind down its exposure to the UK market and, while not in any huge rush, would like to disinvest itself of Asda one way or another.

Another option for Walmart might be to sell Asda to a private equity group and there is thought to be interest. That might be the easier option and one Walmart would prefer to explore before committing to the process of getting the company IPO-ready, if an acceptable bid could be in the offing.

However, with the CMA having already blocked the Asda-Sainsbury’s merger, a private buyer would have to either come from outside of the UK or have no other major interests in the UK groceries sector. Brexit uncertainty means that overseas investors are currently cautious on the UK, calling into question whether the first option is realistic. And given the fiercely competitive nature of the UK groceries market, it would take a brave domestic buyer with little to no experience in that market to take the plunge. Which all means an IPO is still probably the more likely route for Walmart.

The issue with an IPO is that timing would be key. Asda would need to have maintained a strong financial performance over multiple quarters and the market itself would need to be healthy. An IPO would leave Walmart with a still large position in Asda but one it would want to sell down over time. So it would want an IPO at a point in time it was confident would see the post-IPO share price remain healthy.

While Walmart dominates the bricks and mortar groceries market in the USA, its attempts at international expansion have proven far less successful. The company’s international unit now contributes 24% of total group sales but has made several expensive mistakes. Businesses in Germany and South Korea have been pulled out of in 2006 and a major joint venture in India halted in 2013. However, the company has ongoing ambitions in India and wants to focus its international efforts there and in China over coming years.