UK: Tesco considering bid for Mothercare?
Tesco is said to have considered a bid for Mothercare
According to The Sunday Times, Tesco was "weighing a surprise swoop on Mothercare" around six months ago as part of a wider campaign to reinvigorate its domestic hypermarkets.
After a surprise profit warning early last year, Tesco CEO Philip Clarke announced a GBP1bn (US$1.6bn) investment programme designed to improve Tesco's flagging fortunes in its domestic market.
It is understood the retailer has not made a bid for Mothercare yet, instead putting the plan on hold, the paper noted.
A spokesperson for Tesco, however, said it does not comment on rumour or speculation. Mothercare also declined to comment on the reports.
Cantor Fitzgerald analyst Mike Dennis said that while he would not rule out such a deal, Tesco "should avoid this one" or wait until Mothercare's share price is "significantly more distressed".
"Any acquirer of Mothercare would need to bid significantly below the current share price to offset any liabilities and loss of sales from closing stores and duplication of lines," he said.
Shore Capital analyst Clive Black, meanwhile, believes it may be more likely that Tesco is speaking to Mothercare about the baby goods retailer "taking space in what are now a number of over-spaced Extra hypermarkets in the UK."
Earlier this month, Mothercare's share price fell nearly 30% after it issued a profit warning as a result of Christmas discounting in the UK and weak economic conditions overseas.
The retailer has been undertaking a restructuring plan in order to turn its fortunes around. To date, it has closed 80 UK stores.
At its half-year results in November, the company said its turnaround efforts had started to pay off after it swung to its first half-year underlying profit since 2010/11.
Mothercare's share price was up 4.7% to 284.75 pence at 11:26 GMT today.
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