Year of big retail deals
BREXIT uncertainty failed to choke off a string of deals in 2017, with Britain’s fiercely competitive grocery sector booking a number of highprofile transactions.
Supermarket giant Tesco ensured the year got off to a strong start when it sent a shockwave through the industry in January by announcing a £3.7billion swoop for food wholesaler Booker.
Dubbed a defensive move by some analysts, the deal was designed to beef up Tesco’s dominant position by creating the “UK’s leading food business”.
Rival wholesalers rallied against the move, claiming it would hand Tesco an “incontestable power” and urged regulators to shift the takeover on to the scrap heap.
However, the Competition and Markets Authority (CMA) gave the final all-clear to the deal this month, saying it would not lead to higher prices or hit service for shoppers.
The industry was given more food for thought come June when Amazon sealed an all-cash deal worth US$13.7billion (£10.7billion) to buy Whole Foods, causing shares in British supermarkets to tumble.
The acquisition ramped up Amazon’s stake in the UK grocery market following the launch of AmazonFresh and its deal to sell a raft of Morrisons products online.
Sainsbury’s mulled a takeover of convenience store operator Nisa, as it looked to push through its second major retail deal in as many years.
But the group’s reluctance to pull the trigger meant the Co-operative Group emerged victorious, tabling a £137.5million bid for Nisa’s 3,200 stores, which is set for regulatory approval next year.
Jonathan Boyers, KPMG head of corporate finance in the North of England, said the Tesco and Co-op deals signalled a push from the major players to tackle the convenience sector “more effectively”.
He added: “They have all sort of dabbled in developing their own chains of convenience stores, but the independent convenience stores sector has remained independent.
“Obviously the Tesco-Booker deal was a game changer and that forced the Co-op to look at Nisa.
“It caused a shake-out in the whole end of that sector and I just think that it was almost waiting to happen because the supermarkets hadn’t cracked what their solution for convenience was.”