Reports US retail giant Wal-Mart Stores Inc is mulling a £1 billion bid for leading UK budget clothing chain Matalan Plc were dismissed on Monday.

The firms have held informal talks over a takeover that would give Wal-Mart owned Asda another outlet for its George range of clothing, according to the Scotland on Sunday and The Business.

Both papers cited an unidentified insider close to Matalan as saying: "At least two people at a senior level in Matalan have indicated they would be willing to entertain an offer from Asda.

"It makes sense for both parties and there would be far fewer competition problems than there are with (supermarket chain) Safeway."

But Matalan, which operates around 160 stores in mostly out-of-town locations, today dismissed the speculation as "rubbish".

The company said no talks had taken place and if they had it would have had to release a statement under stock exchange rules.