Talks between the two parties stalled on Thursday over price but Tesco and ABF returned to the negotiating table yesterday to thrash out terms. "We can confirm that there are ongoing discussions between the board of Tesco and Associated British Foods," Tesco said.
The news emerged as William Morrison, the Yorkshire-based supermarket group, announced plans to create a further 2,250 jobs next year as it opens its first stores in the South of England.
The Tesco deal with ABF would give the UK supermarket giant control of three Irish trading formats - Quinnsworth in Southern Ireland and Stewarts and Crazy Prices in Northern Ireland. Tesco would become the largest supermarket group in Ireland with a market share of between 20 and 30 per cent in Northern Ireland and the Irish Republic. The three groups recorded combined sales of pounds 1.3bn last year and profits of pounds 60m.
The threat of Tesco's dominance could prompt one of the other UK supermarket giants to make a last-ditch attempt to snatch the deal from under Tesco's nose. Sainsbury has been developing stores in Northern Ireland and Safeway has been in talks with Wellworth, an Ulster chain. Sainsbury looked at the ABF businesses and Wellworth two years ago and ruled out a deal.
With food prices up to 60 per cent higher in Ireland than in Britain, the UK supermarket giants have been eyeing the market jealously. It is thought they could be able to cut prices by 5 per cent with their greater buying power and economies of scale. However, the market is very competitive, particularly in Northern Ireland, and distribution is tougher because of a poorer network.
Separately William Morrison, the Bradford-based supermarket, announced plans to open its first stores in southern England. Announcing the creation of 2,250 jobs next year, Morrison said it would open branches in Erith, Kent, and Banbury, Oxfordshire.
Morrison also announced a 7 per cent increase in pre-tax profits to pounds 135.8m.