The US retail group Walmart has restarted talks on the sale of a stake in Asda in a deal that could value the UK supermarket at £7bn, 15 months after the collapse of a planned merger with Sainsbury’s. Walmart and Asda said they were in conversation with “a small number of third-party investors” who were interested in acquiring a majority stake in Britain’s third-largest supermarket chain. While no price for Asda, which has more than 600 stores and controls about 15% of the UK’s grocery market, has been revealed, the grocer was valued at about £7bn in the planned merger deal with Sainsbury’s. Potential private equity investors Apollo Global Management, Lone Star Funds and TDR Capital were all thought to have put forward first-round bids under talks that began at the start of this year. That process was paused in April after the coronavirus pandemic hit the UK. It is understood additional interest and a strong performance by Asda in recent months has prompted talks to restart. Walmart has said it eventually wants to float Asda on the stock market, but such an ambition could be years away, given the volatility of markets during the coronavirus outbreak. It is understood to see a private equity deal as a way to secure new investment in Asda in preparation for any IPO. The potential deal comes after a surge in sales for supermarkets as weeks of closures of restaurants and cafes, along with a shift to working from home, have increased demand for groceries from consumers. Walmart said: “The pandemic has demonstrated Asda’s resilience and the key role we play in supporting different communities. We have a clear strategy and a long heritage in delivering value for customers and with this in mind, we believe now is the right time to explore options for a third party to invest in our business to accelerate the long-term delivery of our value strategy, both in stores and online.” However, Walmart added: “There is no certainty that a transaction will happen.” The potential Asda sale comes as part of a revamp of Walmart’s international business in recent years in order to focus on higher-growth markets such as China and India. Analysts said it was not clear that Walmart would be able to secure a valuation of £7bn for Asda. Despite the rise in supermarket sales in the UK, its profits have been hit by the rising costs of staff absences, providing protective gear and the shift to online shopping. Profits were already under pressure from the rapid growth of cut-price grocers Aldi and Lidl as well as the likes of B&M and Poundland, which have forced the traditional chains to cut grocery prices. On general merchandise, supermarkets have had to shift away from selling electrical and entertainment goods because of heavy competition online from the likes of Amazon and digital-only services such as Spotify and Netflix. Clive Black, an analyst at Shore Capital, said: “Asda is a good business and makes good profits but growing it is proving to be difficult. Its store estate has suffered more than most from the rise of the discounters.” He said an exit route for private equity might not be easy, although stock market investors might see Asda as an attractive form of utility, steadily generating cash rather than growth. Meanwhile, Asda has a large workforce and any deal is likely to attract close regulatory scrutiny in relation to pension liabilities and debt structures that might put its future at risk. “If investors decide to borrow a lot to fund the deal, we know that debt and supermarkets don’t go together and finance costs can do more harm than good,” Black said. The US firm bought the Leeds-based company in 1999. Asda’s first supermarkets were opened in the 1960s after the merger of two companies, the Asquith family’s business and Associated Dairies & Farm Stores.