Published: Tue, November 14, 2017
Business | By Max Garcia

Tesco's £3.7bn Booker takeover deal backed by watchdog

Tesco's £3.7bn Booker takeover deal backed by watchdog

There has since been concerns that following the acquisition there may be potential for Booker to reduce the wholesale services or terms it offers the "symbol" stores it now supplies, in order to drive customers to their local Tesco.

A raft of rival wholesalers have also raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete, according to the CMA.

The CMA provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient.

But the Competition and Markets Authority, which has been investigating the takeover since May, said Tesco and Booker do not compete in most of their business areas.

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

The CMA said the competitive landscape looked generally rosy because Booker had less than a 20% share of the United Kingdom grocery wholesaling market.

The watchdog also ruled that the move was unlikely to increase prices or reduce services in locations with both a Tesco and a Booker-supplied supermarket due to the strong competition that exists in both the grocery wholesale and retail markets.

The CMA opened its phase one investigation into the merger in May. At the end of June, the companies requested a fast-track referral to the next stage of the investigation.

The CMA said Tesco and Booker do not compete "head-to-head" in most areas in which they operate.

The Times quoted analysts at Bernstein as saying that the CMA's provisional approval was a positive catalyst for Tesco's share price as it reduced uncertainty over this deal.

The CMA is now inviting further comment and evidence before coming to a final view, it said.

When Tesco set out its rationale for the merger earlier this year, the company said: "Optimising a joint national distribution system of Tesco and Booker is expected to lead to material benefits, including sharing parts of the fleet and expanding click and collect services".

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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