Tesco-Booker deal cleared for second stage of investigation
UK’S COMPETITION REGULATOR GRANTS REQUEST TO FAST-TRACK THE PROCESS
Britain’s competition regulator has referred supermarket Tesco’s proposed £3.7 billion (Dh17.5 billion, $4.75 billion) takeover of wholesaler Booker for a detailed investigation, granting a request from the companies to “fast track” the process.
Tesco, Britain’s biggest retailer, and Booker announced the cash and shares deal in January and the Competition and Markets Authority (CMA) formally started a phase 1 review in May.
Last month, Tesco and Booker asked the CMA to move swiftly to a more in-depth phase 2 examination.
The CMA said yesterday it believed that in more than 350 local areas where there was currently an overlap between Tesco shops and Booker-supplied independent grocery retailers, shoppers could face worse terms when buying products.
It said there were concerns that if the deal was cleared there was potential for Booker to reduce the wholesale services or terms it offers the stores it currently supplies, in order to drive customers to their local Tesco.
Reduce competition
Booker supplies services to more than 5,000 so-called “symbol” stores, operating under the Premier, Londis, Budgens or Family Shopper brands.
It also supplies restaurants such as Wagamama and Carluccio’s and operates the Makro cash and carry business.
Tesco runs more than 3,000 stores across Britain.
The CMA said other concerns were raised and considered in the initial probe, but it had not found it necessary to conclude on all of these given the referral.
The regulator will now assess whether the deal could reduce competition by conducting further research and analysis as well as seeking views and evidence from all those potentially affected by the deal.
The CMA’s in-depth phase 2 investigation lasts 24 weeks, which means its final report will be published before Christmas.
The transaction will be cleared if the phase 2 inquiry does not find it will reduce competition. If competition is seen to be affected, the CMA can either seek remedies or block the deal.
Tesco sees the deal as a new source of growth given Booker’s role as a major distributor to the catering industry.
Some Tesco shareholders have criticised the transaction, saying it was overpaying and a distraction from its turnaround plan.
Quick resolution
Tesco said it was pleased the CMA had accepted its fasttrack request.
“This merger has always been about growth, and we remain convinced that it will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers and colleagues,” a spokesman said.
Shares in Tesco were up 0.2 per cent at 171.4 pence at 0801 GMT, while Booker shares were up 0.5 per cent at 190.4.
5,000 stores supplied by Booker. 3,000 Stores across UK run by Tesco.