Today’s announcement of EG On The Move (EGOTM) becoming the UK’s second biggest independent forecourt operator with its acquisition of the 85 Prax company-owned sites is more significant for the industry than the headlines might suggest.
It is no surprise that the administrators, who had spent nearly a year mulling a multitude of offers, chose EGOTM to acquire the entire nationwide network rather than selling regional chunks piecemeal. The Zuber Issa-founded business has a reputation for having an efficient machine of a team in place which does not mess around.
It can absorb businesses seamlessly – look at its bulk site acquisitions from Applegreen and then MPK Garages – and it can roll out new to industry sites in record time. It can also apparently comfortably get access to funding – rumoured to be in the region of £180m to £200m for the mainly freehold sites.
The administrators, trying to sell what they viewed as the crown jewels of the Prax business, wanted a quick deal, with a partner they could rely on with finance in place, rather than being presented with a parade of operators wanting various parts of the business.
Like many in the sector EGOTM has positioned itself as acquisitive – aiming for at least 500 sites by 2030: a target it is now over half-way to hitting with around 285 forecourts; and already above what Zuber Issa achieved with his brother Mohsin at their height with 400 EG Group UK sites.
It is quite a feat. EGOTM has overtaken Rontec’s 267 sites in our latest Top 50 Indies report, less than two years after Zuber sold his shares in Asda to create his own UK forecourt empire.
But the commission operator model attached to the Prax sites isn’t a natural fit for a micro-managing perfectionist of a company like EGOTM. It has said that it will not be making any changes in the coming weeks or months. That means EGOTM, which runs a top-down COCO [company-owned, company-operated] model will have to understand the complexities of working with what essentially are lots of independent businesses, families and stakeholders.
How comfortable will EGOTM be in losing that element of control, collaborating with individuals to make necessary changes rather than issuing directives from head office? It is not something that would seem to be in its DNA.
It seems that a few of the commission operators could be thinking the same. Some 75 of them turned up on a call with EGOTM’s commercial director Ilyas Munshi today, on the day of the announcement, no doubt having lots of their own questions on how things will work.
But EGOTM insists that it is “open-minded” and will be happy with the status quo if it allows the company to invest and grow sites by generating more revenue. It maintains that it is “happy to take time to understand and review” the model.
Then there is the issue of the canopy branding. In an ideal world EGOTM would like to use its own brand, of course, but the sites will be tied into fuel contracts, which will bring with them big penalties for early redemption.
And then there is the elephant in the room which nobody is addressing. Is this the end of the Harvest Energy and Total Energies brands in the UK? Dealer sites sporting these colours when they were supplied by the now defunct Prax oil refinery have replaced these canopies with ones from their new suppliers. But many of the sites that have been bought by EGOTM still carry the branding.
What is for sure is that EGOTM will give the sites, some of which are big and generally under invested in, its Midas touch. EV charging, foodservice, valeting, all of the things that are now expected from EGOTM and modern roadside sites, will be at the forefront.
And what is also undisputed is that this will not be the last significant takeover by EGOTM. It is the second time around for Zuber and he knows what he is doing.
