Dining In: EG Group Buys Leon

Dining In: EG Group Buys Leon​

The Story

EG Group, the company behind last year’s £6.8 billion takeover of Asda, has bought fast-food chain Leon for £100 million. Leon is a healthy, environmentally-friendly fast-food chain, whose mission is to provide sustainable, healthy and delicious food products. EG Group was founded by the two Issa brothers from Blackburn, and is known for its petrol forecourts and service stations. This acquisition highlights EG Group’s desire to gain an even larger foothold in the retail food market.

What It Means For Businesses and Law Firms

Leon was founded by John Vincent and two friends in London in 2004. The brand saw a gap in the market for healthy fast food, and became the first restaurant chain to display nutritional information on its food menus. Currently, Leon has just over 70 restaurants with the main concentration being in London and the South East (Leon). Despite being hit badly by the pandemic and the fall in commuters, Leon remained resilient, posting sales figures of £115 million for 2019/20. With the sale of the franchise to EG, John Vincent will sell his 15% stake and leave his role as CEO (Bloomberg).

EG Group’s acquisition of Leon is in line with their current expansion plans, which have been mostly fuelled by debt finance. The group faced heavy scrutiny for the amount of debt* used in the Asda deal, which included selling off some of Asda’s assets in order to finance the transaction. The group is backed up private equity firm TDR Capital, and has used debt finance in its recent deals with Cinnabon and Sbarro, which served as more additions to its growing food empire.

EG Group’s petrol station empire is expanding through Europe, the UK, the US, and Australia, with the total business empire generating revenue of $25 billion per year. Despite this success, however, the group sees its food forecourts as a key element to future success. Its food outlets accounted for 46% of UK and Ireland gross profit for 2020, at a time when the petrol stations themselves saw a huge fall in numbers (Financial Times).

The group has continued to revamp and open new forecourts with a greater number of food retailers on-site. Last year, EG Group bought the UK’s largest franchise operator of KFC, and also has deals with Subway and Greggs. EG Group intends to incorporate Leon into its future plans, with a target of 20 new store locations per year, beginning in 2022 (EG Group).

*Why use debt? One reason for debt finance (borrowing money) is that a buyer doesn't have to put as much of its own money. This frees up the buyer's capital, which it can use to invest in other projects.

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