Tesco shops at Ahold with £10bn

Tesco is considering an audacious £10bn swoop on the assets of Ahold, the troubled Dutch supermarket giant whose shares tumbled 64 per cent last week after it revealed accounting problems at its US and Argentinian operations.

A high-level committee of five Tesco executives, led by marketing director Tim Mason and finance director Andrew Higginson, is currently working on an assessment of Ahold. They will report this week to chief exec- utive Sir Terry Leahy, who will decide whether to make an approach to Ahold's board.

Any bid will almost certainly put Tesco out of the £3bn bid battle for Safeway, though most retail experts thought Tesco's bid was merely a spoiling tactic.

The number of suitors for Safeway are dwindling, with KKR pulling out of the battle last week. Rumours that Philip Green was about to drop his interest were rubbished by the Arcadia and Bhs boss, while Sir Ken Morrison, chairman of Wm Morrison, was forced to deny entering into talks with J Sainsbury for a combined bid.

Wal-Mart, which through its Asda subsidiary is also bidding for Safeway, has started running a rule over Ahold, while Carrefour is also said to be interested in the Dutch group.

Though on Friday it only had a market value of €3.2bn (£2.2bn), Ahold is still the world's third-largest food retailer. The group's accounting problems, which led to the resignation of chief executive Cees van der Hoeven, and Michael Meurs, chief financial officer, have brought into focus its massive debts, now exceeding €13bn.

Analysts expect Ahold will have to sell businesses to stay afloat and may be susceptible to a bid for the whole group.

Merrill Lynch last week cut its valuation of Ahold's assets from €22.9bn to just €15.2bn following the accounting scandal.

The most attractive assets are the Dutch supermarket business and the two US operations not hit by the accounting scandals, Stop & Shop and Giant. Tesco has no presence in Holland and only a small online joint venture in the US, so could be attracted by these two prime assets.

Other parts of Ahold dovetail with Tesco's existing operations. Both have large presences in the Czech Republic and Slovakia. Ahold has a major operation in Poland, where Tesco has just bought a business, and in Thailand where Tesco is expanding.

All are unaffected by the accounting irregularities which centre on Ahold's US food service business and Disco, its Argentinian retailer.

A Tesco spokeswoman refused to comment on the group's potential corporate activity. But a City analyst said: "Tesco has to know it cannot expand in the UK so its only chance of a transforming move is abroad. This is too good a chance to miss."

Richard Hull, head of retail at Cap Gemini Ernst & Young, said: "Safeway is just one piece in the retailers' global jigsaw. Tesco knows it faces significant competition in winning the Safeway bid. So, to maximise its global reach and compete against Wal-Mart, it will be looking at ways to get the lion's share of Ahold."