Asda in £778m acquisition of discount retailer Netto
Asda, the Leeds-based supermarket group which is the second-largest UK grocery chain, has made a £778m corporate finance acquisition in taking over discount food retailer Netto from its Danish owners.
Although the deal is subject to Office of Fair Trading (OFT) approval, if it goes ahead as expected later this year, Netto's 193 stores will be converted to Asda by the middle of 2011 as part of its new division for supermarkets of less than 25,000 sq ft.
Netto, which has headquarters at Pontefract, West Yorkshire, has stores averaging less than a quarter of the size of Asda shops and selling fewer than 2,000 items, compared with 20,000-30,000 in the larger supermarkets.
It moved into the UK in 1990 but is the leading retailer in Denmark. With strong sales in Scandanavia and other parts of northern Europe, it intends to concentrate its commercial interests there.
Asda became part of the giant US Wal-Mart group in 1999 and the Netto acquisition is the first by the new chief executive Andy Clarke, who moved up to the top job in May 2010.
He said, "Customers will benefit from low prices on a significantly broader range of quality products, complemented by the wide range of services we offer in all our smaller stores."
Asda intends to employ up to twice as many staff as at the existing Netto shops and extend the range of goods stocked.
Business analysts suggest the deal to increase its number of stores to 568 is part of Asda's corporate finance strategy to expand into smaller community-based shops and may involve further acquisitions in the non-food sector to increase its competitiveness with arch-rival Tesco.