Watch­dog gives Tesco go-ahead for Booker takeover

Western Mail - - BUSINESS IN WALES - Holly Wil­liams news­desk@waleson­

Tesco’s £3.7bn takeover of whole­sale group Booker has been given the pro­vi­sional green light af­ter the com­pe­ti­tion watch­dog said it would not lead to higher prices or hit ser­vice for shop­pers.

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

The CMA said Tesco and Booker do not com­pete “head-to-head” in most ar­eas in which they op­er­ate, in par­tic­u­lar the ca­ter­ing sec­tor, where Booker makes more than 30% of its sales.

Shares in Tesco rose 6% on the an­nounce­ment, while Booker also leapt 6% higher in the FTSE 250.

The CMA’s pro­vi­sional all-clear comes as a sur­prise, fol­low­ing ear­lier find­ings that raised con­cerns over 350 lo­cal ar­eas of over­lap be­tween Tesco and Booker, where it was feared the deal could lead to “worse terms”.

It said a group of in­de­pen­dent CMA panel mem­bers scru­ti­nised 12,000 lo­ca­tions where a branch of Tesco and a Booker-supplied shop were both present and found com­pe­ti­tion would be strong enough to pre­vent price hikes.

Si­mon Polito, chair 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.”

Tesco has more than 3,000 stores across the UK, while Londis and Bud­gens owner Booker is the coun­try’s largest whole­saler.

It sup­plies over 5,000 stores un­der the Pre­mier, Londis, Bud­gens and Fam­ily Shop­per brands, as well as thou­sands of in­de­pen­dent re­tail­ers and cater­ers.

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

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 that it 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 wel­comed the pro­vi­sional find­ings, say­ing it looked for­ward to “cre­at­ing the UK’s lead­ing food busi­ness”.

“This merger has al­ways been about growth, and will bring ben­e­fits for in­de­pen­dent re­tail­ers, cater­ers, small busi­nesses, sup­pli­ers, con­sumers and col­leagues,” it added.

The CMA be­gan its in­ves­ti­ga­tion in May and launched an in-depth probe in July af­ter Tesco and Booker asked for the in­quiry to be fast­tracked.

The CMA will make its fi­nal de­ci­sion by the end of De­cem­ber.

It means Tesco will not have to sell off busi­nesses, such as its One Stop con­ve­nience chain, for the merger to go through, with early 2018 set for the deal to com­plete.

Re­tail an­a­lyst Bruno Monteyne, at Bernstein, said the tie-up would make Tesco “not only the big­gest gro­cer in the UK but also one of the fastest-grow­ing food re­tail­ers in the UK for many years to come”.

But he said the fo­cus will now shift on to whether in­vestors will ap­prove the takeover, with 75% of Booker share­hold­ers re­quired to vote in favour.

“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,” he said.

> Tesco’s £3.7bn takeover of whole­sale gi­ant Booker has been pro­vi­sion­ally cleared by the CMA

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