Broker snap: Ahold a good match for Tesco

2nd Nov 2009 11:38

Supermarket giant Tesco has ruled itself out of the running for taking over parts of state-owned lender Northern Rock but is now being put in the frame by ING to buy Dutch supermarket outfit Ahold.The Dutch broking house believes Ahold is seen as being undervalued, and tips Tesco as the company best placed to finance a takeover and realise synergies from a merger. ING reckons the synergies could exceed £493m.'At a potential €12.8 takeover price, Tesco's 2011 profit before tax and earnings per share could rise by more than 31% and 14% [respectively],' ING postulates.While acknowledging that Tesco's assault on the US through its Fresh & Easy venture makes long term strategic sense, Ahold represents 'a one-off opportunity to acquire an undervalued asset at a low point in the US consumer cycle.'Broker Oriel Securities has also issued a bullish note on Tesco, raising its recommendation from 'hold' to 'buy'.