The Issa brothers ought to have got their ducks in a row before they moved to buy Asda

The city’s nostrils are twitching – why did Deloitte quit the Issa brothers just as they were acquiring the supermarket? Something doesn’t smell right, writes Chris Blackhurst

Asda was this month bought for £6.8bn (AFP/Getty)

Hands up if you’d heard of Zuber and Mohsin Issa until very recently.

Come on now, tell the truth. I’ll freely admit the Blackburn-based brothers had not crossed my radar, even though I read the business media pretty avidly, I like to think I know what is going on, who is up and who is down, and when it comes to the country’s wealthiest folk and how they made their fortunes, my interest verges on the unhealthy.

Somehow the pair, billionaires apparently, had passed me by. I’ve also got a thing about the north, because it’s where I’m from originally and there aren’t that many entrepreneurs in that self-made, super-rich category in that part of the world. Still the Issas did not register. The fact they’d built a network of 6,000 petrol forecourts here and internationally had not grabbed my attention.

Then it was announced they were buying Asda and I sat up. Wow. They were taking equal stakes in the supermarket chain along with private equity house TDR Capital in a deal worth a combined £6.8bn. That’s not a sum to be sniffed at, and in the process they’d seen off stiff competition from established, well-known players and presumably they wooed Walmart, Asda’s redoubtable US parent. Clearly, these Issa boys must be something special.

That seemed to be compounded by, in a neat coincidence, the duo being made CBEs in the Queen’s honours list for services to business and charity. Someone at the Palace knew who they were, even if I didn’t.

Asda is a household name. As such it occupies a special place in the British psyche, its affairs and management are of constant interest to the media

No sooner than up they pop, however, and other wheels start to wobble. Deloitte, the auditor to their EG Group, has quit, following it seems a row over corporate governance. Now, EG is not the vehicle acquiring Asda so it’s possible to argue the goings-on with Deloitte don’t matter. But if EG is your main company, the organisation that everything flows from, that has seemingly made you incredibly successful – sufficient to impress TDR and the legion of bankers and lawyers who will have pored over the bid – then it’s significant.

Auditors don’t resign just like that. And for Deloitte to go when the Issas are on the verge of taking over the country’s third biggest supermarket chain is, to say the least, extremely unfortunate. Deloitte would like to be associated with brilliance and triumph, with people who are going places – and the brothers would have exactly fitted that bill.

It’s also perplexing because no proper explanation has been offered as to why Deloitte has departed. One reason being given is that the accountants were unhappy with the lack of independent directors at EG. That may be so, but why? On one level it’s conceivable that Deloitte said to Zuber and Mohsin that, against the backdrop of companies all needing to be seen as squeaky clean and above any form of reproach, it’s now vital they have some objectivity on the board. The Issas would not be alone in being told they must reach out and be seen to be more inclusive and transparent. In which case, why fall out and why resign?

On another level, though, there may be something beyond simply the prevailing mood that prompted the dispute and the decision to stand down, something deeper than conforming to a simple desire for the board to look more presentable. Did Deloitte raise an issue, a serious problem that could have been better solved or might not have arisen at all if there had been independent-minded directors copied in?

Already, no sooner was the Asda acquisition revealed that questions started to be asked about the brothers and how exactly they amassed so many petrol stations. There’s talk of too much debt being used. Meanwhile, also perhaps inevitably, their tax affairs and where ownership of their shares in the business is registered is featuring. The addition of a third strand that has seen the auditor walk out is beginning to feel like a pattern – one, which to those of us who have witnessed many sudden rises followed by equally spectacular falls over the years, feels eerily familiar.

Clive Black, a retail analyst at broker Shore Capital, said: “It is far from ideal, but the fact is, it is a private company and they are free to do whatever they want within the bounds of the law.”

That may be technically so Clive, but it’s not reality. Asda is a household name. As such it occupies a special place in the British psyche, its affairs and management are of constant interest to the media, and not just the business media but the consumer press, social media, politicians national and local, campaign and pressure groups. Asda is part of what is termed the national conversation.

The brothers are finding that owning a business such as Asda is a far cry from running petrol pumps. I was once invited to a lunch by a private equity firm that was mulling over having a crack at Sainsbury’s. They were wondering what to expect, what the reaction would be. I said they had to be prepared for becoming public property, that right now they enjoyed operating in the shadows but that would dramatically change. If they were not ready for the exposure they should leave well alone.

It’s to be hoped for the Issas’ sakes that someone had a similar conversation with them before they took the plunge with Asda. They ought to have got their ducks in a row beforehand. The City’s nostrils are twitching, and they must move quickly to expunge the smell. Hearing from the brothers themselves is unlikely to be enough – Deloitte should be telling us why they were prepared to go no further with this particular fairy story.