Saturday, 16 February 2019
Latest news
Main » Tesco Booker deal gets provisional green light from CMA

Tesco Booker deal gets provisional green light from CMA

14 November 2017

The CMA has denied this could happen, believing that retailers would change symbol groups or seek new suppliers if prices increased.

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.

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

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.

They argued that Booker could raise prices to the shops it supplies. 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.

The Competition and Markets Authority (CMA) said its in-depth investigation into the tie-up found it did not raise competition concerns despite fears raised by a raft of rival wholesalers. Following the provisional decision, the CMA is now inviting further comment and evidence before coming to a final view.

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".

Bruno Monteyne, an analyst for investment bank Sanford Bernstein covering Europe's food retail sector, said: "The argument that Tesco and Booker don't compete directly in the convenience market won". Nisa members yesterday narrowly approved the £143 milion takeover of the chain by the Co-Operative Group, following an earlier abortive takeover by Sainsbury's.

"With a higher shareholder hurdle and the Tesco share price below the level of when the bid was made - around £2 - Booker shareholders may argue for a higher share price", he said.