Sainsbury’s could make bid for key Tesco supplier

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Sainsbury's

Sainsbury’s is reportedly considering a takeover bid of Palmer & Harvey (P&H), a key player in Tesco’s supply chain.

According to Sky News, Sainsbury’s is in the preliminary stages of examining a bid for the UK’s largest tobacco distributor, which makes around 40% of its revenues from Tesco.

Although the move hasn’t been confirmed and has been called “highly speculative”, if it were to take place it would be seen as a defensive retaliation to Tesco’s proposed £3.7 billion merger with supplier Booker.

Sainsbury’s is understood to have been supporting the company through its trading finance platform, which allows suppliers to borrow money cheaply.

READ MORE: Tesco Booker deal under scrutiny as study reveals promises weren’t kept

P&H was recently saved from collapse by a financial rescue package from Imperial and JTI, two of the world’s largest tobacco companies. Just two weeks after this it hired PwC to oversee a sales process.

Despite this it recently signed an 18 month extension on its deal with Tesco, which sees it distribute its good to every Tesco store in the UK.

The Tesco-Booker deal has caused many of P&H’s investors to fear for its future, as it relies so heavily on sales to the UK’s largest grocer. The deal could see these revenues sharply decline as business is shifted to Booker.

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