Tesco has agreed to buy the UK’s largest food wholesaler, Booker Group, for £3.7bn in a deal that will create what the companies called the “UK’s leading food business“. Booker Group’s operations include the UK’s largest cash and carry business as well as convenience brands such as Budgens and Londis. Its main business is the supply of branded and private-label goods to independent convenience stores, grocers and leisure outlets, supplying thousands of product lines to more than 1.3 million consumers.
Dave Lewis, Tesco chief executive, has said he believes the merger to be a ‘low-risk’ one from a competition perspective, although an executive from another UK supermarket has told the BBC that the Competition and Markets Authority (CMA) may think otherwise. Some rival retailers are also likely to express unease at the idea of partnering with Tesco through their business with Booker.
Tesco’s shares were up 10 per cent in morning trading, signaling positive investor sentiment about the merger. Under the terms of the deal, Booker shareholders will own about 16 per cent of the combined business. Laith Khalaf, senior analyst at Hargreaves Lansdown, said that the Tesco-Booker deal is indicative of a larger trend of ambitious competitive strategies amongst UK supermarkets, who have seen their market share being eroded by discount brands and convenience stores, as well as online retailers.