Watchdog gives green light for Tesco hopes to take over Booker

Competition and Markets Authority said the two firms do not compete head to head in most areas

Supermarket giant Tesco’s £3.7 billion deal to buy wholesale group Booker has been provisionally cleared by the competition watchdog.

The Competition and Markets Authority (CMA) said its in-depth investigation into the tie-up found it did not raise competition concerns, despite fears voiced by rival wholesalers.

The CMA said Tesco and Booker do not compete “head-to-head” in most areas in which they operate.

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

It comes despite the CMA having earlier raised fears over 350 local areas of overlap between Tesco and Booker where it feared the deal could lead to “worse terms”.

Simon Polito, chairman of the CMA’s inquiry group, said: “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.”

The CMA’s findings can be seen as surprising given its previous concerns over the deal, which was first announced in January.

Booker is the country’s largest wholesaler and owns Londis and Budgens as franchised outlets.

The CMA previously said it was worried that shoppers could face worse terms when buying their groceries as a result of the deal.

A raft of rival wholesalers have also raised concerns that the deal could see Booker benefit from improved supplier terms making it difficult for them to compete, according to the CMA.

It said they argued that Booker could raise prices to the shops it supplies.

But on announcing its provisional findings, the CMA said Booker would be able to negotiate better terms from its suppliers for some of its groceries, and was likely to pass on these savings to the shops it supplies.

“This might increase competition in the wholesale market, as well as reducing prices for shoppers,” the CMA said.

Tesco shares rose 6.24% or 11.05p to 188.05p.

Picture: Steve MacDougall. The Booker site in Dunsinane Avenue, Dundee. Tesco’s £3.7 billion deal to buy the wholesale group has been provisionally cleared by the competition watchdog.

Picture: Bob Douglas. The Tesco Extra store at Kingsway Retail Park in Dundee.