CMA gives Tesco's £3.7bn Booker takeover the all clear

CMA gives Tesco's £3.7bn Booker takeover the all clear

CMA gives Tesco's £3.7bn Booker takeover the all clear

Tesco's plans to merge with wholesalers Booker has been given the green light by the Competition and Markets Authority in a move due to add to the fears some analysts have for the firm.

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.

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.

The CMA also considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop were both present (more than 12,000 shops).

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Its shares were nearly 5% higher in early deals on the FTSE 100 while Booker's were 1.4% up.

It had raised worries that there could be a potential for Booker to reduce the wholesale services or terms it offers the stores it now supplies, in order to drive customers to their local Tesco.

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 supermarket expects the merger to be completed in early 2018.

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".

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'This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues'.

But he said the focus will now shift on to whether investors will approve the takeover, with 75% of Booker shareholders required to vote in favour. The CMA will launch an investigation into the deal. Following the provisional decision, the CMA is now inviting further comment and evidence before coming to a final view.

As of 09:28 GMT, Tesco's share price had added 4.55 percent to 185.05p, outperforming the broader United Kingdom market, with the benchmark FTSE 100 index now standing 0.12 percent higher at 7,423.98 points.

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