Tesco given final clearance for £3.7bn tie-up with Booker
UK’s competition authority finds merger does not raise competition concerns
Supermarket Tesco’s £3.7 billion takeover of wholesale group Booker has been given the final all-clear after the competition watchdog said it would not lead to higher prices or hit service for shoppers.
The UK’s 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 rival wholesalers. Tesco and Booker welcomed the decision and said the deal is now expected to complete next March.
The CMA said Tesco and Booker do not compete “head to head” in most areas in which they operate, in particular the catering sector, where Booker makes more than 30 per cent of its sales. It added that it “carefully” considered the impact on shops supplied by Tesco - such as Premier, Londis and Budgens — that it also competes with, but found the supermarket cannot have any direct influence. Simon Polito, chairman of the CMA’s inquiry group, said: “We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors.
“Retailers have told us that they shop around for the best prices and service from their wholesaler, and we are confident that this will continue after Tesco buys Booker.” He added that it had been an “important investigation”. “Millions of people use their local supermarket or convenience store to buy their groceries or essentials, so it is vital that they have enough choice to secure the best deal for them. Having examined the evidence in depth, we are satisfied this will remain the case following the merger,” he said. Tesco has more than 3,000 stores across the UK, while Londis and Budgens owner Booker is the country’s largest wholesaler.
It supplies more than 5,000 stores under the Premier, Londis, Budgens and Family Shopper brands as well as thousands of independent retailers and caterers. A raft of rival wholesalers have raised concerns that the deal could see Booker benefit from improved supplier terms, making it difficult for them to compete. They argued that this could eventually kill competition and see Booker raise prices to the shops it supplies. But 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. “This might actually intensify competition in the wholesale market, leading to cheaper prices for the shoppers and caterers Booker supplies,” the CMA said.
The CMA began its investigation in May and launched an in-depth probe in July after Tesco and Booker asked for the inquiry to be fast-tracked. Its investigation saw a group of independent CMA panel members scrutinise 12,000 locations where a branch of Tesco and a Booker-supplied shop were both present and found competition would be strong enough to prevent price hikes. The CMA also surveyed hundreds of retailers, which showed that most shops use more than one wholesaler and frequently switch. Following the decision, shareholders will now be asked to vote on the deal next February.