Tesco’s £3.7bn Booker deal given go-ahead

TESCO and Booker have won approval for a £3.7bn merger, despite worries that the deal will make the supermarket too powerful.

The Competition and Markets Authority (CMA), which backed the deal, said it had no concerns a merger would drown out competition and was not worried prices or service would be compromised.

The deal adds to a string of acquisitions the supermarket has made over the years, with many now being disposed of.

Last year Tesco sold restaurant chain Giraffe to Harry Ramsden owner Boparan Holdings for an undisclosed sum and offloaded Dobbies Garden Centres to private equity companies for £217m.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said the deal could still face resistance after Schroder Investment Management, which owns 4.65pc of Tesco, last month said it was bad for investors. But Khalaf said: ‘Chief executive Dave Lewis’ hand has recently been strengthened by a healthy set of half- year results, which included the resumption of a dividend. That may well be enough to get the shareholder base on board with the deal.’

Booker is a wholesaler which supplies goods to 125,000 convenience stores and 468,000 restaurants, pubs and other outlets. It also owns the Premier, Londis and Budgens brands but does not control the stores, which are run by independent shopkeepers.

The CMA said the franchise arrangement Booker had with its brands meant it could not force them to stock Tesco goods and it concluded that strong competition meant it was unlikely either would raise prices or cut service quality.

As the Big Four supermarkets struggle with sluggish sales and the popularity of discounters, the sector is being forced to reinvent itself.

Last year Sainsbury’s took over Argos, while Morrisons secured a deal with Amazon.

However, Khalaf added that the merger could be too much of a risk for Tesco, as it was only just starting to recover from a run of poor sales figures.