Tesco weighed up bid for Mothercare

Tesco considered the acquisition six months ago but the plan has been put on hold, sources told the Sunday Times.

However, City insiders say the recent slump in Mothercare’s share price could rekindle Tesco’s plan. But no approach has been made by the grocer so far.

Tesco declined to comment.

Shore Capital retail analyst Clive Black said in a note to the City: “We are surprised by this story as Tesco has spent much time recently talking about sweating its existing assets, improved capital discipline and seeking stronger solvency ratios. Spending £300-350m on Mothercare, assuming a 30% premium to its current market capitalisation of  £250m, would to our minds not be wholly consistent with such a plan, but it is difficult to dismiss speculation outright until confirmed or otherwise.

“Where there may be more substance to the story, in our view, is that Tesco may be speaking to Mothercare about the baby goods retailer taking space in what are now a number of  over-spaced Extra hypermarkets in the UK.”

Tesco has bought coffee chain Harris + Hoole and restaurant chain Giraffe in the last two years as it diversifies to make its supermarkets shopping destinations.