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etvfutures.com November 22, 2017


Tesco Booker deal gets provisional green light from CMA

14 November 2017, 06:36 | Cesar Cruz

Tesco and Booker asked the CMA to fast-track its review in June

Tesco Expected To Announce Turnover Figure Of £1 Billion Per Week

The Competition and Markets Authority (CMA) have provisionally given the Tesco's (LON:TSCO) £3.7 billion takeover of Booker (LON:BOK) the all-clear.

The CMA found that Tesco as a retailer and Booker as a wholesaler, supplying to caterers, independent and symbol group retailers, did not compete head-to-head in most of their activities.

'In particular, Tesco does not supply the catering sector to which Booker makes over 30% of its sales.

Panel members at the CMA investigated how bringing together the UK's largest grocery retailer and the UK's largest grocery wholesaler, which supplies the pub sector, would affect competition.

It said they argued that Booker could raise prices to the shops it supplies.

It found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies.

The CMA's findings are surprising given its previous concerns over the deal, which was first announced in January.

Last month seven of the UK's largest wholesalers who all voiced concerns that the deal would "threaten the survival of the independent retailer".

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The regulator accepted that Booker Wholesale's prices would be lower than rivals in some areas due to the deal, but did not acknowledge the impact on Booker's retail customers, only on consumers.

"This might increase competition in the wholesale market, as well as reducing prices for shoppers", the CMA said.

The U.K. regulatory body referred the merger for further investigation in July as it believed the deal could lead to worse terms for shoppers.

The blue-chip grocer welcomed the decision in a statement, noting that it would continue to work with the watchdog as it prepares its final report due by the end of the year.

Retail analyst Bruno Monteyne at Bernstein said the tie-up would make Tesco "not only the biggest grocer in the United Kingdom but also one of the fastest growing food retailers in the United Kingdom for many years to come".

Similarly many of Tesco's shareholders have begun to cool on the deal as an initially v-shaped recovery in the group's fortunes has turned into a long campaign.

Tesco and Booker's market share prices jumped by 5.65 and 5.74 per cent respectively after the news this morning (14 November).



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