Tesco wins provisional green light from regulator for £3.7bn Booker deal

● CMA says supermarket giant and wholesaler do not compete head-on

Tesco secured provisional approval yesterday for its £3.7 billion takeover swoop on food wholesaler Booker from the regulator, opening up a new avenue of growth in a fiercely competitive food retailing market.

Shares gained some ground in both companies after the Competition and Markets Authority (CMA) said it had conducted an in-depth review and provisionally concluded that Tesco’s purchase of Booker raised no competition concerns.

City analysts said the provisional green light to the ground-breaking deal would come as a relief to Tesco chief executive Dave Lewis, who has turned around the flailing performance of Scotland’s largest supermarket player since he took over three years ago.

Most analysts had expect- ed that Tesco would have to agree store disposals to gain clearance from the CMA. Both Tesco and Booker, the country’s biggest grocery wholesaler, welcomed the regulatory announcement.

Tesco said it expected to complete the deal, which requires shareholder approvals, in early 2018. However, analysts said some residual uncertainty around the deal remained as the spotlight now moved to whether investors in Tesco and Booker would approve it.

Tesco needs 50 per cent shareholder approval for the transaction, while the threshold at Booker is 75 per cent.

One broker said: “With a higher shareholder hurdle and the Tesco share price below the level when the bid was made (about £2), Booker shareholders may argue for a higher share price.”

Some Tesco investors have said the acquisition would deflect focus from what has been a largely organic trading turnaround at the group.

The CMA said it found that Tesco as a retailer and Booker as a wholesaler supplying caterers and independent retailers Premier, Londis, Budgens and Family Shopper do not compete head-to-head in most of their activities.

In particular, it found that Tesco does not supply the catering sector that accounts for more than 30 per cent of Booker’s sales.

Simon Polito, chairman 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.”

The CMA is inviting further comment and evidence before making its final decision by the end of December.