Tesco merger with Booker gets provisional approval from CMA

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"The risk is that just as the good ship Tesco is steadying, it gets blown off course by the Booker deal", he said.

"The fly in the ointment could yet be Tesco shareholders, with some influential players still not backing the merger". However, the CMA also concluded that the wholesale market would remain competitive in the longer term, noting that Booker's share of the United Kingdom grocery wholesaling market - at less than 20% - was not sufficient to justify the longer-term concerns. "That worry is compounded by a tough consumer environment, changing shopping habits and fierce levels of industry competition".

The CMA pointed out that Tesco did not supply the catering sector, which makes up 30 per cent of Booker's sales.

Tesco's takeover of wholesaler Booker Group has been cleared by the competition watchdog - provisionally, at least.

Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets. The CMA consequently began a fast-track probe into the deal in July.

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

It said they argued that Booker could raise prices to the shops it supplies.

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

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".

Shares in Tesco (LON:TSCO) have jumped almost five percent in London this morning, as Britain's competition watchdog cleared provisionally the grocer's tie-up with wholesaler Booker Group (LON:BOK).

Simon Polito, the chairman of the CMA's inquiry group, said: "Millions of people use their local supermarket or convenience store to buy their groceries or essentials".

Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets, and the CMA has previously said it was anxious that shoppers could face worse terms when buying their groceries as a result of the deal.

Booker said: "We are pleased that the CMA has provisionally concluded that this transaction does not lessen competition, and will continue to work with the CMA ahead of its publication of a final decision, expected in December". Purchasing Booker boosts its access to the foodservice sector at a time when it is under growing pressure from discounters Aldi and Lidl.

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