Tesco considered making a bid for mother and baby retailer Mothercare, reports RetailWeek.
The supermarket contemplated the acquisition six months ago, in a bid to refresh its stores.
The plan has been put on hold and no approach has been made by Tesco, sources told the Sunday Times, but the recent slump in Mothercare’s share price could put Tesco’s plan back into action.
In the last two years, Tesco has bought coffee chain Harris + Hoole and restaurant chain Giraffe as it continues to diversify its supermarket offering.
RetailWeek states that Shore Capital retail analyst Clive Black said in a note to the City: “We are surprised by this story as Tesco has spent much time recently talking about sweating its existing assets, improved capital discipline and seeking stronger solvency ratios.
"Spending £300-350m on Mothercare, assuming a 30 per cent premium to its current market capitalisation of £250m, would to our minds not be wholly consistent with such a plan, but it is difficult to dismiss speculation outright until confirmed or otherwise.
“Where there may be more substance to the story, in our view, is that Tesco may be speaking to Mothercare about the baby goods retailer taking space in what are now a number of over-spaced Extra hypermarkets in the UK.”