Auditor Deloitte Touche Tohmatsu will take over the British operations of troubled rival Andersen, after sources said previous-preferred bidder KPMG backed off due to concerns over Andersen's legal problems.

Deloitte and Andersen UK announced the tie-up in a statement yesterday. An Andersen spokeswoman said the firm formally abandoned talks with KPMG earlier in the day. KPMG sources said the firm had become worried about opening itself to potential legal action stemming from Andersen's audit of collapsed US energy trader Enron.

Deloitte & Touche said it had "carefully structured" the transaction to ensure it could face no liabilities related to the Enron lawsuits. "It has been arranged in such a way as that's not an issue at all," Mr John Connolly, Deloitte UK chief executive, said. However, KPMG was less confident that this was possible. "How can Deloitte shield themselves from the risk? They have exactly the same level of risk as we did," one KPMG source said. - (Reuters)