Tesco faces probe in £3.7bn Booker bid

An investigAtion has been launched into the £3.7bn megamerger of tesco and Booker amid fears it will harm competition and customer choice.

the Competition and Markets Authority yesterday said it will review the tie-up between Britain’s biggest grocer and the wholesale supplier to thousands of convenience stores and restaurants.

Bosses of the two firms have promised that the proposed merger, which was announced in January, will spur huge growth for the enlarged company, but it has been criticised by some independent shopkeepers who are worried it will give tesco greater muscle in setting prices and push other suppliers out of the market.

now shareholders, rivals, customers and other interested parties have been asked to submit their views before the CMA decides whether to rubber-stamp the deal or investigate further.

the CMA said this initial investigation would run until July 25, with interested parties given until June 13 to comment.

it added: ‘During this period, the CMA will assess whether the deal could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker.’

tesco shares fell 0.8pc, or 1.45p, to 185.35p in the wake of the CMA announcement, while Booker closed down 1pc, or 2.1p, at 200.6p,

tesco sees the deal as a way to take advantage of the growing number of people who are choosing to eat out instead of cooking at home. it has also said customers will be able to shop for professional restaurant ingredients and equipment in stores, the enlarged group would have greater buying power and they could share a delivery network.

However it has come up against opposition, including from within tesco boss Dave Lewis’s inner cir- cle. non-executive director Richard Cousins quit the board in protest, and there was even a suggestion that tesco chairman John Allan considered the deal was inappropriate given that it came so soon after the grocer’s inflated profits scandal.

others are concerned it will harm competition in the sector.

Booker has 125,000 retailers on its books, including about 5,400 stores under its own network, such as Premier, Londis and Budgens. tesco owns almost 2,500 convenience stores under its express and one stop brands.

two leading investors have called for the merger to be abandoned. But Lewis, who was parachuted in from Unilever in 2014 to overhaul the grocer, has insisted it will help tesco make savings of at least £175m a year.

After the initial investigation, the CMA could wave the deal through, ask tesco and Booker to offer concessions or refer the deal for a more detailed probe which could last 24 weeks. Most analysts see a referral for further scrutiny as inevitable.