Tesco gets CMA ap­proval in Booker takeover

The Star Late Edition - - BUSINESS REPORT - By James Davey

TESCO won pro­vi­sional ap­proval for its £3.7 bil­lion (R70.11bn) takeover of whole­saler Booker from the UK competition reg­u­la­tor yes­ter­day, mov­ing Bri­tain’s big­gest re­tailer closer to se­cur­ing a new av­enue of growth.

The Competition and Mar­kets Au­thor­ity (CMA) said it had con­ducted an in-depth re­view and pro­vi­sion­ally con­cluded that Tesco’s pur­chase of Booker does not raise competition con­cerns.

The pro­vi­sional un­con­di­tional clear­ance will come as a ma­jor re­lief to Tesco. Most an­a­lysts had ex­pected that Tesco would have to agree store dis­pos­als to gain clear­ance.

Both Tesco and Booker, the coun­try’s big­gest gro­cery whole­saler, wel­comed the CMA an­nounce­ment. Tesco said it ex­pected to com­plete the deal, which also re­quires share­holder ap­provals, early next year.

Shares in Tesco and Booker were up 4.8 per­cent and 5.1 per­cent re­spec­tively yes­ter­day morn­ing.

Bern­stein an­a­lysts said they ex­pect some un­cer­tainty to re­main, with the fo­cus shift­ing to whether in­vestors will ap­prove the deal.

Their analysis in­di­cates that Tesco will achieve the re­quired 50 per­cent share­holder ap­proval and that the fo­cus will be on Booker, where the thresh­old is 75 per­cent.

“With a higher share­holder hur­dle and the Tesco share price be­low the level when the bid was made (about £2), Booker share­hold­ers may ar­gue for a higher share price,” the bro­ker’s an­a­lysts said.

For each Booker share, Tesco is of­fer­ing 0.861 new Tesco shares and 42.6 pence in cash. Ac­tiv­i­ties The CMA said it found that Tesco as a re­tailer and Booker as a whole­saler sup­ply­ing cater­ers and in­de­pen­dent re­tail­ers Pre­mier, Londis, Bud­gens and Fam­ily Shop­per do not com­pete head-to-head in most of their ac­tiv­i­ties.

In par­tic­u­lar, it found that Tesco does not sup­ply the cater­ing sec­tor that ac­counts for more than 30 per­cent of Booker’s sales.

“Our in­ves­ti­ga­tion has found that ex­ist­ing competition is suf­fi­ciently strong in both the whole­sale and re­tail gro­cery sec­tors to en­sure that the merger be­tween Tesco and Booker will not lead to higher prices or a re­duced ser­vice for su­per­mar­ket and con­ve­nience shop­pers,” said Si­mon Polito, chair­per­son of the CMA’s in­quiry group.

The CMA is now invit­ing fur­ther com­ment and ev­i­dence be­fore mak­ing its fi­nal de­ci­sion by the end of next month.

The pro­posed deal is Tesco chief ex­ec­u­tive Dave Lewis’s bold­est move yet. He be­lieves it will pro­vide a new source of growth by giv­ing the group ac­cess to the fast-grow­ing “out of home” food mar­ket, given Booker’s role as a dis­trib­u­tor to the cater­ing in­dus­try. – Reuters

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