THE WALL STREET JOURNAL. Monday, December 7, 2020 |B3
and merchandise sales offset a
fall in fuel volumes.
EG Group said its ambition in
the U.S., which is already home
to half its employees, is to be-
come a one-stop shop for break-
fast, tobacco and fuel for morn-
ing commuters, and for groceries
when they return home.
The company bought Kroger
Co.’s nearly 800-strong network
of convenience stores and gas
stations in 2018, gaining brandsworks more on development
and acquisitions, Mohsin told a
newspaper in 2011. He added
that their approach was to look
for sites with lots of nearby
homes, or “good traffic flow and
‘chimney pot’ surroundings.”
The strategy appears to be
paying off in the pandemic. EG
Group recently reported a 54%
rise in third-quarter earnings,
stripping out the impact of ac-
quisitions, as higher groceryThe proposed merger of
Utah’s largest hospital system
with Midwestern giantSan-
ford Healthhas collapsed, the
latest deal to fall apart in the
consolidating sector.
Intermountain Healthcare,
a Salt Lake City-based non-
profit, and Sanford, a non-
profit headquartered in Sioux
Falls, S.D., said on Friday that
they have halted talks, which
were announced a little more
than a month ago.
The deal’s abrupt end
comes one week after the exit
of longtime Sanford Chief Ex-
ecutive Kelby Krabbenhoft.
Sanford said it decided to call
off the proposed pairing with
the appointment last week of
its new CEO, Bill Gassen.
“With this leadership
change, it’s an important time
to refocus our efforts inter-
nally as we assess the future
direction of our organization,”
Mr. Gassen said.
Mr. Krabbenhoft had
planned to serve as president
emeritus of the combined hos-
pital system after the merger.
The former chief executive’s
final weeks at Sanford were
tumultuous, following an
email he sent to staff in which
he said he wouldn’t wear a
mask after recovering from
Covid-19.
The board and Mr. Krabben-
hoft “mutually agreed to part
ways,” Sanford said last week.
Mr. Krabbenhoft couldn’t
immediately be reached for
comment.
The proposed deal would
have created a 69-hospital gi-
ant with Intermountain Chief
Executive Marc Harrison as its
top executive.
Executives also planned fur-
ther consolidation, with their
combined operations as “an
eastern and western center of
gravity” for growth, Dr. Harri-
son said in October.
BYMELANIEEVANS
Hospital
Systems’
Merger
Collapses
Source: the companyNote: EG Group had just one site from 2001 to 2011EGGrouphasrapidlyexpandedfromasingleU.K.gasstationtoa
globalgiantwithmorethan6,000sites.Growth Drive
2017 '18 '19051015€20 billionLocation of EG Group sites Total annual revenue2011 '1502,0004,0006,000U.K. RestofEurope
U.S. RestofWorldgas station in 2001 near Man-
chester in northern England and
opened a cafe and shop on its
spare land. Working at their
parents’ site had taught the
brothers that motorists often
wanted refreshments and that
coffee could be more lucrative
than fuel. With gas stations typ-
ically selling mostly cigarettes
and lukewarm tea, they spotted
an opportunity to attract driv-
ers with higher-quality food.
To buy more gas stations,
they borrowed money, including
from Lloyds Banking Group PLC,
which became a long-term ad-
viser and provided funding that
allowed them to avoid selling a
stake in the business. They
funded refurbishments with
profits, adding convenience
stores selling products from
milk to artisan bread, and rec-
ognizable fast-food chains such
as Burger King and Subway.
EG Group opened England’s
first drive-through Starbucks in
2010 and is now the U.K.’s larg-
est franchise operator of the
coffee chain. Convenience-store
and fast-food offerings now
make up about two-thirds of
the company’s revenue.
Mohsin, 49 years old, is typi-
cally responsible for day-to-day
business. Zuber, a year younger,like Kwik Shop and Turkey Hill,
and last year acquired Cumber-
land Farms, with 567 stores in
the Northeast and Florida.
David Marcotte, a retail ana-
lyst at research firm Kantar,
said the brothers have raised
standards at the U.S. stores
they have bought but questions
whether Americans can be per-
suaded to shop for groceries at
gas stations. Drivers in the U.S.
are more likely to choose where
to stop based on gas prices
than food, he said. Other ana-
lysts said there isn’t room at
the sites EG Group has bought
to add many extra facilities.
The speed of EG Group’s ex-
pansion and its debt load are
also attracting scrutiny.
S&P Global Ratings esti-
mates EG Group’s debt will hit
$11 billion this year, with a
debt-to-earnings ratio of 10
times. By contrast, the ratio for
Alimentation Couche-Tard Inc.,
a Canadian peer, is 1.9 times,
S&P said. An EG Group spokes-
man said S&P’s calculation
didn’t reflect synergies from its
recent deals.
Separately, both EG Group’s
longtime auditor Deloitte and
Moody’s Investors Service have
raised concerns that the com-
pany’s financial reporting and
corporate governance haven’t
kept pace with its increased
size and complexity.
Until November, the 44,000-
employee company had a board
consisting of just four people:
the brothers and two partners
from TDR. Such concerns in
part recently prompted Deloitte
to resign, while Moody’s down-
graded EG Group’s credit rating.
The EG Group spokesman
said Deloitte signed off on its
last audit and hadn’t raised any
accounting issues. He said
Moody’s concerns didn’t reflect
recent investments to
strengthen the business.
Despite their success—the
Issas now own a pair of jets
and a $30 million mansion in
London’s tony Kensington—
those who know the brothers
say they remain humble and
hardworking. They have kept
the business based in Blackburn,
where they grew up, having
shunned calls to relocate.BUSINESS NEWS
Two brothers who became
billionaires in Britain by focus-
ing on food over fuel at gas sta-
tions are looking to roll out
that model globally in the hope
of finding broader success.
As teenagers, Mohsin and
Zuber Issa worked at a filling
station in northern England
owned by their parents, who
emigrated from India in the
1960s. They used that experi-
ence to expand from the pur-
chase of a single derelict site
nearby into one of the world’s
largest independent gas-station
operators, with over 6,000 sites
across Europe, and more re-
cently in Australia and the U.S.
They took advantage as big
oil companies sold off underper-
forming gas stations, snapping
up sites in the U.K. and then in
Europe. Their playbook: dou-
bling down on higher-margin
food, selling fresh and packaged
groceries and franchising some
of the world’s most recognizable
fast-food brands.
Now the Issa brothers are
looking to repeat the trick in
the U.S.EG Group—the busi-
ness they own along with pri-
vate-equity firmTDR Capital—
made its sixth American
acquisition in just over two
years in November.
But as the brothers explore a
stock-market listing for the
business, they are facing scru-
tiny over corporate governance
and the debt amassed to fund
the rapid expansion. And some
retail analysts say EG Group
faces a tougher test stateside.
The brothers are also in the
middle of wrapping up the big-
gest deal of their lives: the $9
billion purchase, with TDR, of
Walmart Inc.’s majority stake in
British grocery chain Asda
Group Ltd.
The deal, announced in Oc-
tober, catapulted the Issas to
prominence in the U.K. The
brothers had kept a low profile
despite amassing a fortune es-
timated at $4.7 billion by a
British “rich list” and EG
Group’s near $24 billion in an-
nual revenue.
The Issas bought their firstBYSAABIRACHAUDHURI
ANDALISTAIRMACDONALDGas-Station Empire Looks to U.S.
Zuber and Mohsin Issa, the sons of immigrants, found success selling groceries and coffee at stations.EG GROUPWHO WILL BE THE 2020
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