Monday, 20 November, 2017

Tesco gets green light for £3.7bn Booker takeover

Kristine Garrett | 14 November, 2017, 13:22

The Competition and Markets Authority has provisionally cleared Tesco's £3.7 billion merger with the cash-and-carry group Booker. The deal, announced in January, would combine the U.K.'s largest retailer with the country's largest food wholesaler, a surprise move that could bring hefty cost savings for the supermarket operator.

In particular, it found that Tesco does not supply the catering sector to which Booker makes over 30% of its sales.

The U.K. regulatory body referred the merger for further investigation in July as it believed the deal could lead to worse terms for shoppers.

The CMA concluded that the wholesale market would "remain competitive in the longer term", because Booker's share of the United Kingdom grocery wholesaling market, at less than 20%, "was not sufficient to justify the longer-term concerns".

Simon Polito, chairman of the inquiry group, said: "Millions of people use their local supermarket or convenience store to buy their groceries or essentials".

The watchdog established that there was enough competition, both within the retail and the wholesale market, to guarantee the deal would not result in reduced service or higher prices for consumers. At the end of June, the companies requested a "fast track" referral to the next stage of the investigation. In a brief statement, Tesco welcomed the CMA news, adding that it expected the Booker takeover to complete in early 2018.

Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets, and the CMA has previously said it was anxious that shoppers could face worse terms when buying their groceries as a result of the deal.

The company said: "We look forward to creating the UK's leading food business, bringing together our combined expertise in retail and wholesale".

Booker, in its statement, said it will continue to work with the competition regulator ahead of its final decision, which is due in December.

Mr Monteyne said: "With a higher shareholder hurdle and the Tesco share price below the level of when the bid was made - around £2 - Booker shareholders may argue for a higher share price".

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