Proposed P&H deal latest move in supermarket chess

A reported takeover of wholesaler Palmer & Harvey (P&H) by supermarket giant Sainsbury’s has been described as a “defensive move” by a major finance firm.

P&H is the UK’s largest delivered wholesaler, and the fifth largest private company in the UK. It is owned by current and former employees and distributes tobacco, alcohol, chilled and frozen products to about 90,000 retail outlets from a fleet of over 1,300 vehicles.

The company is a major distributor to Tesco.

The takeover attempt is being seen as a strategic response to Tesco’s £3.7 billion takeover of wholesaler rival Booker in January.

Jonathan Buxton, head of retail at Cavendish Corporate Finance, described the move by Sainsbury’s as a “further sign of the seismic shift currently taking place in the UK’s grocery industry”.

“This prospective purchase of Palmer & Harvey, which is currently one of Tesco’s key suppliers, would be a defensive move by Sainsbury’s following Tesco’s agreed £3.7bn takeover of wholesale giant, Booker.”

Currently the acquisition is only speculative, but if the deal goes ahead, it would follow the Sainsbury’s recent acquisition of Home Retail Group, which included the Argos brand.

Cavendish Corporate Finance said traditional supermarkets are facing pressures to compete successfully against online retailers and discounters.

“We are likely to see further deals in this vein, as supermarkets seek to boost margins by acquiring more links in the supply chain,” Mr Buxton added.