Asda is reportedly eyeing a potential £4.4 billion takeover of discount retailer B&M, according to reports at the weekend.
The Sunday Times reported that Asda is planning to bid for B&M European Value Retail, which is chaired by former Tesco boss Terry Leahy. Walmart-owned Asda has reportedly commissioned research on the viability of adding the B&M business to its operations, enabling it to reduce reliance on food and up its clothing sales.
The move would follow rival Sainsbury's purchase of Argos owner Home Retail Group, which took place last year.
However, following The Sunday Times' report, The Telegraph quoted Asda sources as saying that the retailer was not planning a swoop for the discounter, adding that Asda parent Walmart was in charge of mergers and acquisitions.
Deal Implications
Commenting this morning, Barclays European Food Retail Equity Research assessed the implications of such a deal, were it to materialise, saying, "Asda’s weak sales performance in recent years made us wonder how committed Wal-Mart is to the UK market – but if Wal-Mart were to spend several billion pounds then this would represent a very strong commitment."
Barclays also added that a move for B&M would indicate that "Wal-Mart may have decided to drive its recovery through non-grocery avenues rather than more worrying strategies such as launching more aggressive pricing activity in grocery.
"As the player with the largest overlap with Asda, Morrison might be seen as having the most to lose from extra resource provided to Asda by its parent, should this materialise."
No Smoke Without Fire?
Clive Black from analysts Shore Capital added, "Without firm statements from either party the story remains one of speculation albeit we sense no smoke without fire in this respect. We will watch with interest to see how matters pan out but food retailers are a source of activity at the moment – Sainsbury/Argos, Tesco-Booker – and no doubt more’ game theorying’ will ebb and flow here on."
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.
