Tesco eyes Albertons |
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Tue, 20 Sep 2005 00:35
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LONDON: Retailer Tesco Plc is seriously considering the prospect of acquiring U.S. grocery chain Albertsons Inc. The company, the largest supermarket chain in the country, has sent a team to the U.S. to study the proposal in detail, according to sources. Albertsons, trying to hold ground in the wake of stiff competition from Wal-Mart, has announced that it is up for sale and has quoted a price tag of $7.6 billion.
The Tesco team in the U.S. has already started a due diligence of the U.S. retailer, which has 2,500 stores in 37 states and which employs 240,000 people. Its revenues are in excess of $40 billion. Tesco will have to find out a modality for the takeover and the team is studying this aspect too. It has an online joint venture with American retailer Safeway Inc called GroceryWorks.
Tesco has already expanded to Europe and east Asia in recent years.
In the Albertsons acquisition, the company has competition. While France's Carrefour and Belgian company Delhaize are known to be vying for Albertsons, Wal-Mart itself is offering to buy out the competitor, though it is certain that such a deal may attract competition clauses.
Come what may, Tesco is in expansion mode. It is reported to have acquired as many as 185 development sites in the U.K. (called land banks), which are estimated to be more than the combined land banks of the three rival retailers -- Asda, J. Sainsbury and Wm Morrison Supermarkets. This is capable of creating 4.5 million sq. ft. of market space. Analysts predict the company, which now has 546 supermarkets in the country and some 646 smaller stores, could reach a market share of 45 per cent within five years. At present, it has a share equivalent of 1 pound in every 8 pounds spent in British shops.
As the company opens new stores and plans an entry into non-food products areas, it is expected to create 7,500 new jobs between now and February. It is opening its first non-food store, Tesco Homeplus, in Manchester in October.
Tesco is expected to announce its financial results tomorrow and forecasts are that there will be a 14 per cent increase in profits to about 940 million.
Meanwhile, Wal-Mart group company Asda has lodged an official complaint with the city watchdog, the Financial Services Authority, about a claim professed by Goldman Sachs that Tesco is cheaper than its rivals. Asda says the note prepared by Goldman Sachs is misleading as a number of errors in the price comparison has been identified. It had sought that the report be withdrawn and a correction published.
There are also complaints by other rivals with Office of Fair Trading against Tesco's increasing stranglehold on sites.
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