Backlash as Tesco deal gets all-clear

Rivals claim £3.7bn merger with Booker will cost jobs and destroy competition

A war of words broke out last night after regulators approved Tesco’s £3.7bn merger with Booker.

Leading wholesalers warned the tieup up would destroy their businesses and put thousands of jobs at risk.

And analysts predicted that the deal could spark a wave of consolidation across the industry and place even more pressure on cash- strapped suppliers.

The backlash came after the Competition and Markets Authority gave provisional clearance to the tie-up between Tesco and Booker, Britain’s biggest wholesaler and owner of convenience stores Londis, Premier and Budgens.

The CMA insisted the deal did not raise competition issues – and could even bring down food prices for shoppers.

It said an independent group had scrutinised 12,000 locations where branches of Tesco and Londis, Premier and Budgens were present and found competition would be strong enough to prevent price hikes. The regulator added that Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries and that it would likely pass on some of the savings to shoppers in the form of cheaper goods.

But the findings – which sent Tesco shares to the top of the FTSE 100 risers leaderboard with a jump of more than 6pc – drew criticism from wholesalers who claimed the CMA failed to adequately address their concerns.

John Mills, Landmark Wholesale managing director, said: ‘We are incredibly disappointed with the CMA’s decision. This move will not increase competition, it will destroy it.’

Tesco has more than 3,000 stores across the UK, while Booker is the country’s largest wholesaler and supplies more than 5,000 stores under the Premier, Londis, Budgens and Family Shopper brands.

The proposed deal would turn Britain’s biggest retailer into a major supplier to small shopkeepers, serving 125,000 independent convenience stores as well as 468,000 restaurants and pubs. Clive Black, analyst at Shore Capital, said Tesco was probably ‘amazed’ the deal went through with no store closures or restrictions to gain clearance.

He said: ‘The wholesale trade in particular will be wondering why on earth it ever bothered engaging at all with the CMA.’

‘If Tesco and Booker can merge with unconditional approval, then the scope for further largescale consolidation cannot be ruled out.’

In October seven of the UK’s leading retailers urged the CMA to block the deal, warning it could put them out of business if it was to go ahead.

Wholesalers Today’s, Spar, Bestway, Bidfood, Confex, Sugro and Landmark wrote to the CMA warning that the deal threatened the survival of independent retailers by creating a group with such large buying power.

The CMA began its investigation into the merger in May and launched an in- depth probe in July after Tesco and Booker asked for the inquiry to be fast-tracked. It is inviting further comment and evidence and will make the final decision by the end of December.