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Sainsbury's eyes up bid for wholesaler

Supermarket giant Sainsbury's is mulling a takeover approach for wholesaler Palmer and Harvey (P&H), according to reports.

Britain's second biggest supermarket is said to be considering a swoop for P&H after the 90-year-old firm was put up for sale, Sky News said.

The move comes after Tesco agreed a £3.7 billion deal in January to merge with food wholesaler Booker, while Sainsbury's has also sealed a £1.4 billion takeover of Argos owner Home Retail Group in recent months.

P&H has a turnover of more than £4 billion a year and supplies alcohol, groceries and frozen food to 90,000 retail outlets, including Tesco supermarkets.

Jonathan Buxton, head of retail at Cavendish Corporate Finance, said a prospective deal would be a defensive move by Sainsbury's in the face of the Tesco-Booker deal.

He said: "While Sainsbury's interest in the struggling wholesaler is currently only speculative, the deal, if it goes ahead, would follow the supermarket's recent £1.4 billion acquisition of Home Retail Group.

"These acquisitions, along with the Tesco-Booker deal, demonstrate the seismic shift currently taking place in Britain's grocery industry which is seeing traditional supermarkets facing pressures to compete successfully against online retailers and discounters.

"We are likely to see further deals in this vein, as supermarkets seek to boost margins by acquiring more links in the supply chain."

Shares in Sainsbury's closed up more than 1% on the London Stock Exchange on Friday.

A spokesman for P&H said: "We do not comment on market speculation.

"We have recently completed a successful refinancing, and as usual we continue to have positive discussions with our trading partners about building and extending our relationships."

Tesco has faced criticism from investors over its merger with Booker, with some shareholders branding the takeover tilt a "distraction" and urging the Big Four grocer to scrap the move.

The deal is expected to face a lengthy investigation from the Competition and Markets Authority.

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