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emfizz.com November 24, 2017


Tesco-Booker deal provisionally cleared

15 November 2017, 12:53 | Jan Cross

The CMA is to prepare a final report on the proposed Tesco Booker merger

The CMA is to prepare a final report on the proposed Tesco Booker merger

The deal, announced in January, would combine the U.K.'s largest retailer with the country's largest food wholesaler, a surprise move that could bring hefty cost savings for the supermarket operator.

Supermarket giant Tesco's £3.7 billion deal to buy wholesale group Booker has been provisionally cleared by the competition watchdog. Read said he expected Tesco to be asked by the CMA to sell stores.

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.

The regulator said that the two companies don't compete head-to-head in most of their activities, stressing that Tesco doesn't supply the catering sector where Booker makes more than 30% of its sales.

"My only concern would be for local suppliers that supply Bookers, will Tesco dictate what price they are willing to pay for their goods and squeeze their margins even more", says Patel.

It examined evidence from Tesco and Booker, which represent the UK's largest retailer and wholesaler respectively, as well as evidence from over 65 wholesalers, suppliers and retail chains, and a survey of hundreds of retailers.

It comes despite the CMA having earlier raised fears over 350 local areas of overlap between Tesco and Booker where it feared the deal could lead to "worse terms".

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A number of competing wholesalers expressed concern that Booker would benefit from improved suppliers' terms after the merger, making it hard for them to continue to compete.

It also found that the deal would allow Booker to negotiate better terms with its suppliers for some of its groceries but that it...

It added that Booker's share of the United Kingdom grocery wholesaling market - at less than 20% - was not large enough to spark longer-term concerns.

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". "The stores that are part of Booker's symbols (Budgens, Londis, Premier, etc.) are (almost all) independent stores that can buy part of their supply outside Booker and swap to a different symbol or wholesaler". The wholesale trade in particular will be wondering why on earth it ever bothered engaging at all with the CMA, an organisation that seemingly lives in a different universe to anything that may be considered a normal view of the world.

Tesco expects to complete the merger in early 2018.

The provisional unconditional clearance will come as a major relief to Tesco.



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