Asda’s acquisition of Netto increases the likelihood that the Walmart-owned grocer will stage a takeover of a non-food retailer, analysts believe.
The grocer said it wanted to increase the number of Asda Living shops from 25 to 150 - a “big ask” in the opinion of Shore Capital analyst Clive Black - and roll out its click-and-collect service nationwide, which the Netto deal will only in part achieve.
Oriel Securities analyst Jonathan Pritchard said: “Given Tesco’s lead in non-food, an acquisition from Asda must be on the cards.” He said he would not “list runners and riders in the race for Asda’s attention”, but added he is “pretty convinced a race exists”.
There has been speculation about a potential bid for Home Retail for several months. Black said it is a “highly attractive cash-generative business model” meaning it will “always be a candidate on a non-food target list”. Matalan has also been mooted. The retailer was put up for sale last year, but founder John Hargreaves instead decided to refinance.
A source close to Asda also suggested Bhs might be an option, if owner Sir Philip Green were to sell. Green offloaded a clutch of Bhs stores to Primark last year, but has been revamping the rest of the chain.
Collins Stewart analyst Greg Lawless said: “Asda has enough on its plate now with Netto but this deal signals that if the right opportunity comes up, it will go for it.”