Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Tesco gets greenlight for £3.7bn Booker buy

Tesco gets greenlight for £3.7bn Booker buy

The merger regulator has given Tesco a greenlight to purchase wholesaler Booker Group in a move likely to fundamentally rebalance the UK’s battered retail sector.

Shares in Tesco were 1.9% or 3.5p higher at the market open, at 180.5p.

The £3.7 billion buyout has been subject to an aggressive pushback from competitors, with seven of Booker’s biggest rivals last month demanding that the deal be blocked.

Similarly many of Tesco’s shareholders have begun to cool on the deal as an initially v-shaped recovery in the group’s fortunes has turned into a long campaign.

The Competition and Markets Authority noted that there was sufficient distinction between the two business’s areas of operation to clear the deal on market competition grounds. The provisional decision will now be issued for comment and further evidence before a final sign-off.

‘[We]found that Tesco as a retailer and Booker as a wholesaler - supplying to caterers, independent and symbol group retailers including Premier, Londis and Budgens - do not compete head-to-head in most of their activities,’ the regulator said in a statement.

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

‘The group, recognising that Tesco's shops nevertheless compete with Booker-supplied shops, considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop are both present (over 12,000 shops). 

‘It did this to examine whether, in any of these areas, it might be profitable for the merged company to raise prices or reduce service levels either in retail or wholesale.  The CMA has provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient to defeat such a strategy.’

Consolidation of the retail chain has only accelerated since Tesco originally announced its intentions in January.  Nisa members yesterday narrowly approved the £143 milion takeover of the chain by the Co-Operative Group, following an earlier abortive takeover by Sainsbury’s.

In a statement, Tesco said: ‘We look forward to creating the UK's leading food business, bringing together our combined expertise in retail and wholesale.

‘This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues.’

The CMA is now expected to deliver its final opinion by the end of the year.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Wealth Manager on Twitter