Asda is reported to be considering a £4.4 billion takeover of B&M European Value Retail, the discount retailer run by the billionaire Arora brothers. However, the company has played down a newspaper report with analysts also questioning whether US parent company Walmart would want to pay that kind of price.

The Sunday Times had said Asda, which trails market leader Tesco and Sainsbury’s in annual sales, is in the early stages of assessing a bid for B&M, which is chaired by Terry Leahy, the former chief executive of Tesco.

It said Asda has commissioned external research on B&M and cited an unidentified industry source as saying that buying B&M would reduce Asda’s reliance on food sales and provide it with a network to stock its George clothing range.

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The UK supermarkets sector is hugely competitive and fashion and homewares are key sectors for growth as food margins are under pressure. Last year Sainsbury’s bought Argos-owner Home Retail for £1.1 billion and expanded its Tu Clothing offer. And Tesco widened its tie-up with fashion giant Arcadia to open more branches of its major fashion retail brands in Tesco’s larger stores. It has also recently put heavy marketing spend behind its own F&F fashion line.

Of Britain's big four supermarket players, which also includes Morrisons, Asda was hurt the most by the rise of German discounters Aldi and Lidl. It has reported 11 straight quarters of underlying sales decline.

B&M trades from over 540 UK stores, selling products ranging from bedding to barbecues to food although homewares and other interiors products are its biggest business. Its shares listed at 270 pence in 2014. They closed Friday at 340 pence, valuing the business at £3.4 billion .

The Sunday Times said applying a normal takeover premium would take its price to at least £4.4 billion.

Asda and B&M could not be immediately reached for comment.
 
Additional reporting by Sandra Halliday.