FILE PHOTO: A company logo is pictured outside an ASDA supermarket near Manchester, Britain, April 7, 2016. REUTERS/Phil Noble/File Photo

LONDON (Reuters) - Asda, the British supermarket arm of Wal-Mart Stores WMT.N, is considering a 4.4 billion pounds ($5.7 billion) takeover of B&M European Value Retail BMEB.L, the discount retailer run by the billionaire Arora brothers, The Sunday Times reported.

The newspaper said Asda, which trails market leader Tesco TSCO.L and Sainsbury’s SBRY.L 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.

Last year Sainsbury’s bought Argos-owner Home Retail for 1.1 billion pounds, while in January Tesco agreed on a 3.7 billion pounds takeover of wholesaler Booker BOK.L, a deal which is currently being probed by competition regulators.

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

B&M trades from over 540 UK stores, selling products ranging from bedding to barbecues to food. Its shares listed at 270 pence in 2014. They closed Friday at 340 pence, valuing the business at 3.4 billion pounds.

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

A spokesman for Asda declined to comment. B&M could not be immediately reached for comment.($1 = 0.7697 pounds)