TESCO DEALS FOR SCOTTISH FOOD CHAIN

LONDON (FNS) -- Tesco here has moved to acquire the Scottish food retailer William Low & Co., the fifth-largest chain in Scotland, for about $310 million.Tesco said the deal, if it goes through, would give it a significantly higher profile in Scotland, without adding retail space to existing capacity in that market. Low operates 45 stores in Scotland and 12 in northern England.A bidding battle for

LONDON (FNS) -- Tesco here has moved to acquire the Scottish food retailer William Low & Co., the fifth-largest chain in Scotland, for about $310 million.

Tesco said the deal, if it goes through, would give it a significantly higher profile in Scotland, without adding retail space to existing capacity in that market. Low operates 45 stores in Scotland and 12 in northern England.

A bidding battle for Low is possible, however, as J. Sainsbury, London, requested from Low financial information that already had been provided to Tesco. Sainsbury, which received the information it requested in mid-July, said it was considering its options.

Financial analysts here said the move indicated Sainsbury might make a counterbid for Low. Sainsbury had negotiated unsuccessfully with Low about a potential takeover earlier this year.

Tesco and Sainsbury are eager to gain control of Low because of its strong position in Scotland, where it has 6.6% share of the market, analysts said.

Tesco opened the battle with an agreed-to offer of $240.2 million cash (about 154 million pounds at the exchange rate of $1.56 per pound) for the Low chain. It also would assume about $75 million of Low debt.

Low reported pretax profits of $32.9 million and sales of $697.3 million in the year ended Sept. 4.

Tesco also said it would spend about $55 million to re-banner and upgrade Low's stores if the deal is completed.

In Scotland, the market leader is Argyll, which operates the Safeway and Presto stores, with a 16% market share. Asda, with a 12.1% share, currently ranks second. A combined Low-Tesco operation, however, would likely move ahead of Asda to become the second-largest food retailer in Scotland, according to reports.

Tesco and Sainsbury, the United Kingdom's two largest food retailers, have a limited presence in Scotland. Sainsbury moved into Scotland in 1992 and operates four stores there, three supermarkets and one hypermarket. Tesco operates 16 stores in Scotland.

Analysts said the major food retailers are searching for new ways to expand their operations. The market in Great Britain has become increasingly competitive, which has put pressure on margins, and the government is adopting tougher rules on store-development projects.

The potential bidding war over Low could mark a new stage in British food retailing as the leading chains turn their attention away from organic expansion toward acquisitions of smaller retailers, the analysts said.