Deloitte has resigned as auditor of EG Group, the UK petrol stations company whose billionaire owners just agreed a £6.8bn takeover of grocery chain Asda, because of concerns over its governance and internal controls, according to four people briefed on the matter. 

EG Group, which owns nearly 6,000 petrol stations and reported more than €20bn of revenue last year, informed its bondholders in a private notice this week that KPMG had been appointed as its auditor after Deloitte resigned with “immediate effect”. 

EG Group did not specify the reason for Deloitte’s resignation in its notice, but the people told the Financial Times that the company’s auditor for the past four years had resigned because of governance concerns. One of these people added that the resignation was triggered by concerns at Deloitte that EG Group’s controls had not improved in line with its growth. 

EG Group said in a statement to the FT: “As in previous years, Deloitte signed a clean audit for EG Group’s 2019 financial statements, and there have been no disagreements on any auditing or accounting matters. We are pleased to be working with KPMG going forward, and remain committed to making continued progress with our internal processes, controls and governance.”

KPMG and Deloitte declined to comment.

EG Group, which is jointly owned by private equity group TDR Capital and brothers Mohsin and Zuber Issa, has grown rapidly in recent years through a series of debt-funded acquisitions of petrol stations in Europe, Australia and the US.

Their stake in the company has turned the brothers from Blackburn in Lancashire into billionaires and made them two of the most powerful operators in the global petrol station market.

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The Issa brothers and TDR this month agreed to buy Asda, the UK’s third-largest supermarket chain, from Walmart in a £6.8bn deal. The brothers and TDR will hold equal stakes in Asda, but EG Group itself is not a party to the supermarket deal, which is the largest private equity purchase of a UK company since KKR’s £11.1bn acquisition of Boots in 2007, according to figures from Refinitiv. 

Earlier this month the Issa brothers were made CBEs in the Queen’s Birthday Honours list for “services to business and charity”. Chancellor Rishi Sunak hailed their acquisition of Asda, tweeting that the supermarket chain was “returning to majority UK ownership for the first time in two decades”. 

The petrol station group had not planned to change its auditor this year, with EG’s annual report published in July disclosing that Deloitte had been reappointed to the role. The Big Four accounting firm gave the group an unqualified audit for 2019 and did not flag any concerns in its report.

EG filed its 2019 accounts later than planned, however, and had to seek permission from lenders to push back the deadline for publishing its 2019 results from the end of May to July 31. The group blamed this on the “severe disruptions” caused by the pandemic.

EG’s owners also cancelled a call with its debt investors last week during which they had been expected to explain the implications of the Asda deal and give a trading update.

Via Financial Times