Wal-Mart and German retailer Metro are reportedly considering an alliance in which the two would exchange stakes in each other's firms, allowing each to concentrate on its own business speciality. According to German newspaper reports, "company sources" said Wal-Mart would take over Metro's Real department stores and Extra hypermarkets, while Metro would acquire Sam's Club, Wal-Mart's 1,000 strong warehouse-style chain, to complement its highly profitable C&C operations. Compensation would be paid should there be any discrepancies in the value of the assets exchanged. A Metro spokesman dismissed the report as "massive speculation and fantasy", but the Welt am Sonntag newspaper suggested the deal would appease the German retailer's shareholders, who have vigorously opposed any moves to take over Metro in its entirety. Meanwhile, Tesco denied reports it had approached bankers over a loan to fund a bid for Metro's Real chain. Tesco finance director Andrew Higginson admitted he had contacted bankers to price a 3bn euro loan, but insisted the eurobond programme had "absolutely nothing to do with any corporate finance whatsoever". However, a source close to the German retail trade said a strong contingent of the Metro camp would rather do business with Tesco than Wal-Mart. Wal-Mart is also unpopular with the unions, who have reacted angrily to its expansion plans in Germany. Bankers say a large acquisition would make Tesco less vulnerable to a takeover bid by pushing its value beyond the reach of any of its rivals. But industry analysts are sceptical over a Tesco/Real deal, arguing such a purchase would be incompatible with Tesco's strategy at present. "I would be very surprised to see Tesco entering the German market," said Michelle Wolff, European food retail analyst at Merrill Lynch. "The ideal solution for [Metro] shareholders would be a merger or alliance with a continental European retailer." Carrefour would be the most obvious choice, said Wolff, although its tie up with Promodès makes a deal unlikely in the short term. Sam's Club isn't Wal-Mart's best performing division, she added, while selling Real and Extra would make Metro a far less attractive proposition in the long term. {{NEWS }}