The UK’s biggest supermarket group, Tesco, revealed on Friday that it has agreed to buy the country’s biggest food wholesaler, Booker Group, in a deal valued at £3.7bn.
As well as its wholesale business, Booker owns the Premier, Budgens and Londis convenience store brands, while Tesco owns the One Stop convenience store chain.
Booker’s cash and carry outlets supply convenience stores, grocers, pubs and restaurants. As a result, Tesco will expand into the catering sector through the acquisition.
Under the terms of the agreement, Booker shareholders will receive 0.861 new Tesco shares and 42.6 pence in cash for each Booker share.
The two companies said the deal would create the “UK’s leading food business”. However, it is likely to face scrutiny from the Competition and Markets Authority (CMA).
Tesco chief executive Dave Lewis told the BBC’s Today programme that he believed the CMA would not block the merger because Booker’s franchise model means it would not result in Tesco owning any more stores.
But retail specialist Nick Bubb told the Guardian: “Our instant reaction is that the Competition and Markets Authority 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 (via Premier and Londis etc).”
As a result, Bubb said, “it is by no means clear that the CMA will allow things to proceed very far without having a good look at the overlap”.
The deal has been recommended by both boards of directors, but still needs approval from Tesco and Booker shareholders as well as regulators.