Tesco merger with Booker gets provisional approval from CMA

Olive Hawkins
November 14, 2017

The competition regulator has provisionally cleared Hertfordshire-based Tesco's £3.7bn deal to buy wholesaler Booker.

The proposed merger had attracted vocal opposition from the rest of the wholesale industry, who argued it would give Britain's largest supermarket "uncontestable power" over the grocery supply chain.

The Competition and Markets Authority (CMA) said, after conducting an in-depth review, that it had provisionally concluded that Tesco's purchase of Booker does not raise competition concerns.

"In particular, Tesco does not supply the catering sector to which Booker makes over 30% of its sales", the CMA said.

A raft of rival wholesalers have also raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete, according to the CMA.

But the CMA said it was clear the two firms did not now compete head-to-head in most of their activities - such as supplying the catering sector, which accounts for 30% of Booker's business.

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Tesco is the UK's largest grocery retailer by some margin, while Booker is the largest wholesaler - supplying numerous Welwyn Garden City based company's competitors.

The CMA said the competitive landscape looked generally rosy because Booker had less than a 20% share of the United Kingdom grocery wholesaling market.

The CMA opened its phase 1 investigation into the merger in May.

The watchdog established that there was enough competition, both within the retail and the wholesale market, to guarantee the deal would not result in reduced service or higher prices for consumers. It said it expects to complete the Booker takeover in early 2018. At the end of June, the companies requested a "fast track" referral to the next stage of the investigation.

But on announcing its provisional findings, the CMA said Booker would be able to negotiate better terms from its suppliers for some of its groceries, and that it was likely to pass on these savings to the shops it supplies.

The company said: "We look forward to creating the UK's leading food business, bringing together our combined expertise in retail and wholesale".

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