Wal-Mart may join £10bn race to buy Marks & Spencer

Wal-Mart, the world's largest supermarket chain, yesterday refused to rule itself out of joining the £10bn bidding war for Marks & Spencer.

The American company, which took over Asda in 1999, is now being linked with a possible bid for M&S following the announcement last week by Philip Green, the billionaire owner of Bhs, formerly British Home Stores, that he wanted to buy the company.

A spokeswoman for Asda declined yesterday to rule out a Wal-Mart bid. She said: "Talk of a takeover is purely speculation, and we never comment on speculation."

While some City analysts suggest Asda and Marks & Spencer would be an uncomfortable fit - claiming Asda is too down-market while M&S is the height of middle-class aspiration - they both have an important factor in common. Their fortunes were both re-invigorated by the hiring of George Davis, the fashion designer, who created the George clothing range for Asda and the Per Una range for M&S.

Earlier this week Asda announced the creation of a Wal-Mart backed business, George Global, which intends to push the George range across the world. It is already available in Wal-Mart stores across America.

Per Una was credited with improving M&S's fortunes when it hit a rough patch four years ago and has recently been expanded to include the Dué range for teenagers.

Despite profits of £750m, Marks & Spencer is seen once again to be underperforming after a profit slump. Currently without a chairman, it is vulnerable to take over.

But some City insiders argue a marriage between Wal-Mart, which made £14bn profits last year, and M&S would not work.

Richard Hyman, chairman of Verdict Retail Research Consultancy, said: "Wal-Mart certainly has the muscle to take over M&S. But if they did it would be surprising because M&S doesn't fit with their philosophy of business or life. I've learned not to think that Wal-Mart will never do something, but Wal-Mart is about everyday low prices and to have everyday low prices you have to have everyday low costs. M&S couldn't be an everyday low-price retailer. It would be unsustainable."

Others believe there are rich pickings to be had from Marks & Spencer. While its profits are low compared with other retailers - Tesco makes £1.7bn a year - analysts believe redundancies, and forcing down suppliers' costs could see profits quickly boosted.

Wal-Mart began 40 years ago as a small store in Bentonville, Arkansas - where it still has its head office - and grew with a ruthless low-cost, low-prices philosophy that forced many of its competitors out of business.

But it is also a controversial retailer. It has been criticised for its close links to the American right which many believe has filtered in to its business practices. It has been accused of using its financial muscle to force record companies to change the covers of albums.

It is also accused of building enormous supermarkets on the edge of small towns which knock out competition, and of using cheap labour in Asia.

A spokesman for Marks & Spencer said yesterday: "Everything at the moment is speculation. The situation is that we have yet to receive a formal proposal. Marks & Spencer is still a company that makes £755m profit and serves 10 million customers a week."