Tesco, Britain's largest grocer, is expanding its business empire into garden centres by agreeing to acquire Dobbies Garden Centres, of Scotland, and roll it out as national chain.

Its £155.6 million offer, a 28 per cent premium to Dobbies's share price before it announced an approach, has been backed by management, although it is understood that Apax, the private equity firm, had also held talks with the garden centre group.

There was also speculation that Sir Tom Hunter, Scotland's richest man and a holder of 10.6 per cent of Dobbies, was contemplating a bid.

Sir Tom, who dominates the UK garden centre market, owns Wyevale Garden Centres, Blooms of Bressingham and a 30 per cent stake in Flying Brands, a horticulture mail-order service.

However, Tesco, which has negotiated a £1.5 million break fee with Dobbies, has bought a 22.6 per cent share in the garden centre group and this morning acquired more shares to bring its overall holding to about 28 per cent, making it increasingly unlikely that Sir Tom would be able to launch a counteroffer.

A spokesman for Tesco said that both the management of Dobbies and some larger shareholders had sold their stakes to the supermarket group, but that it had not held discussions with Sir Tom about purchasing his 10.6 per cent stake, which, until this morning, made him the largest shareholder in Dobbies.

Tesco's move took the City by surprise because it represented a departure from its core brand and business.

The chain's growth in the UK is becoming ever more difficult amid growing concerns about its dominance of the grocery market.

However, Tesco was keen to emphasis the "green" rationale behind the deal today, which it says will appeal to customers who are concerned about the environment.

Commenting on the deal, Sir Terry Leahy, the chief executive of Tesco, said that for many people "gardening is the way they express their desire to be green".

Tesco said that management and the 140-year-old Dobbies brand would remain in place.

At present Dobbies has 21 stores, largely in Scotland, and Tesco plans to expand that to 100 across the country.

Sharon Brown, the finance director of Dobbies, said: "Never say never, but there are no plans at the moment to sell any Tesco products at Dobbies or for them to take any of our products."

Sir Terry said: "With our backing and support, the management team will invest in the development of Dobbies in order to realise more quickly its full potential, create value for shareholders and grasp the opportunities offered by a shift towards green consumption."

Dobbies shares gained nearly 10 per cent to £14.80, while shares in Tesco edged down 2.25p to 433p.

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