Tesco Earns Regulator Approval for Booker Takeover

Tesco has been given provisional approval for a 3.7 billion pound takeover of the wholesaler, Booker, from the UK’s competition regulator. The takeover, if approved by shareholders, would give the UK supermarket a valuable potential avenue for further growth.

shareprices.com - Wednesday, November 15, 2017

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The competition markets authority has conducted an in-depth review into the bid, and concluded that it would not raise competition concerns. Tesco started the move in January, and it has sparked more consolidation in the grocery market, as other supermarkets are also looking for ways to grow their business. Analysts expect to see even more M&A activity as supermarkets will be looking to use the excess capacity within their own supply chains.

Clive Black, an analyst for Shore Capital, said that the wholesale trade in particular will be wondering why it bothered engaging with the competition markets authority - noting that the CMA ‘seemingly lives in a different universe’. He criticised the decision to allow the merger, as if Tesco and Booker could merge with unconditional approval, then there is potentially scope for even more large-scale consolidation.

The clearance is good news for Tesco, however, as many had expected that to earn the clearance the supermarket would have had to agree to store divestments, or to accept restrictions on its operations. Tesco and Booker, however, argued that the deal would help to enhance competition, and to promote the interests of consumers. Several rival wholesalers have rejected the deal, and are calling for it to be blocked as they believe that it would give Tesco an unshakeable grip on the grocery market.


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