Tesco denies ‘defensive’ move against private equity

Tesco has denied it is fighting a rearguard action to ward off private equity buyers with a share buyback programme.

It comes amid speculation that the retailer, and fellow FTSE 100 grocer Sainsbury’s, could be the next targets for a takeover after Morrisons was auctioned off on Saturday.

According to Reuters, Tesco boss Ken Murphy insisted the move was “business as usual” and “isn’t defensive by any means” while revealing its first-half results.

He continued: “This…is the result of the very strong cash flow we’ve generated and we’ve spoken to shareholders for some time about the possibility of buybacks.

READ MORE: Tesco to close the book on £326m accounting scandal

“We would never speculate on any form of activity in the market from a private equity perspective.”

Tesco’s share price soared from 252.45p on Friday to around 274p on the back of takeover rumours and “strong” financial results.

Fortress, which lost out to Clayton, Dubilier & Rice in the Morrisons battle, has implied it is looking for other British acquisitions.

Its managing partner Joshua Pack said this week that the UK “remains a very attractive investment environment” and pledged to “explore opportunities”.

Speaking last month, Bernstein analyst William Woods labelled Tesco the “most attractive” publicly-listed supermarket for private equity buyers.

“The business is simplified, diversified and dominant, and the next five years are set to be a story of consistent, strong execution and returning to shareholders,” he said.

Woods also praised the retailer’s wholesale business, Booker, and its online sales of almost £5 billion.

However, its loss-making bank and massive pension deficit could puncture investor interest.

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