Tesco agrees bumper tie-up with wholesaler Booker

Tesco says tie-up will create the UKs leading food business. Picture Sarah Peters

Tesco says tie-up will create the UKs leading food business. Picture Sarah Peters

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Tesco, Britain’s biggest retailer, has reached an agreement to buy food wholesaler Booker in a £3.7 billion deal.

The grocery giant said the tie-up will create “the UK’s leading food business” and deliver significant cost savings for the combined group.

Booker is the country’s largest wholesaler and owns the Londis and Budgens convenience store brands.

The companies said the deal would bring “benefits for consumers, independent retailers, caterers, small businesses, suppliers and colleagues, as well as delivering significant value to shareholders”.

Tesco shares jumped more than 10 per cent in morning trading as investors welcomed the news.

Chief executive Dave Lewis said: “This merger with Booker will further enhance Tesco’s growth prospects by creating the UK’s leading food business with combined expertise in retail, wholesale, supply chain and digital.

“Wherever food is prepared and eaten – ‘in home’ or ‘out of home’ – we will meet this opportunity with the widest choice and best service available.”

However, experts believe the deal, which the pair are describing as a merger, will face regulatory scrutiny from the Competition and Markets Authority (CMA).

Independent retail analyst Nick Bubb said: “The CMA will have a field day with this, as although Tesco is mainly a retailer in the UK and Booker a wholesaler, Tesco does own the One Stop convenience store chain that competes with Booker’s interest in symbol groups and convenience store retailing.

“So it is by no means clear that the CMA will allow things to proceed very far without having a good look at the overlap.”

But Lewis and Booker chief executive Charlie Wilson batted away suggestions of potential competition concerns.

Wilson said: “We think it is pro-competition; the CMA will go through what it does, but we’ve had good advice on this.”
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “The UK’s supermarkets are engaged in new strategies to cope with the brave new world, where the discounters have stolen market share and consumers have turned away from big superstores, preferring instead to do their shopping in convenience stores or on their mobile phones.

“Sainsbury’s bought Argos, Morrisons is flirting with Amazon, and now Tesco has revealed its plans to drive further growth.”

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