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Creating a new shopping experience is behind the acquisition of Leon by Asda

Asda will become more of a destination shopping experience with its acquisition of fast-food chain Leon, says Daniel Burke.

EG Group, the new owners of Asda, have acquired the fast-food chain Leon Restaurants for £100 million, in order to provide a better all-round shopping experience for its customers.

EG is no stranger to food outlets. They own more than 6,000 petrol stations across ten countries, and have been installing Starbucks, KFC, Burger King, Greggs, Cinnabon and Subway branches at their forecourts.

Asda and Leon are not two businesses you would expect to come together. Asda is traditionally ‘low cost’, while Leon provides good quality fast-food with premium prices, but it is clear that Asda are looking at providing a new customer experience.

I would expect Asda to follow this up with more acquisitions or partnerships in order to make Asda a ‘go to’ place for all of your shopping needs.

EG appears to be closing in on Caffe Nero after buying up the chain’s debt pile and have even considered buying Topshop.

Asda may well become the bricks and mortar equivalent of Amazon. A place where you can go to buy anything you need.

This is part of a wider trend in the retail sector where larger players are acting as ‘virtual department stores’ for a number of brands. The attraction for the established retailer is the opportunity to showcase younger/innovative brands in order to gain access to that section of the buyer market, while the new brands get access to an established distribution network.

Leon was majority-owned by two private equity firms, Active Partners and Spice Private Equity, with stakes of 30% and 40% respectively. Its founder John Vincent owned 15%, while its other two founders held the other 15%. Given the tough year the hospitality sector has endured the offer was probably too good to turn down by the owners.

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