Tesco announce merger with Booker
The UK’s biggest multiple retailer, Tesco, has struck a deal to buy the UK’s biggest food wholesaler, Booker Group, in a £3.7bn deal.
The firms said the deal would create the “UK’s leading food business”.
Booker Group is the UK’s largest cash and carry operator, supplying some 700,000 convenience stores, grocers, pubs and restaurants.
Booker also owns the Premier, Budgens and Londis convenience-store brands.
Under the terms of the deal, Booker shareholders will end up owning about 16% of the combined group.
Commenting on the announcement, Dave Lewis, chief executive officer of Tesco said: “Tesco has made significant progress in turning around our UK retail business. This Merger with Booker will further enhance Tesco’s growth prospects by creating the UK’s leading food business with combined expertise in retail, wholesale, supply chain and digital.
“Wherever food is prepared and eaten – ‘in home’ or ‘out of home’ – we will meet this opportunity with the widest choice and best service available.”
Charles Wilson, chief executive officer of Booker added: “Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve.
“We believe that joining forces with Tesco offers the potential to bring major benefits to end consumers, our customers, suppliers, colleagues and shareholders.”
In a joint statement, the companies said the merger will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders.
They also said the deal meant both firms were well placed to serve the large, established ‘in home’ food market as well as the faster growing ‘out of home’ food market.
“By bringing together Tesco and Booker’s retail and wholesale expertise, supply chain and digital capabilities, the combined group will be able to provide greater choice, quality, price and service in the food market, whilst improving efficiency and reducing food waste,” the statement said. “The combined group will bring together the capacity and capability to generate new growth and deliver significant revenue and cost synergies.”
Also commenting on the announcement, Gary Hobbs, senior equity analyst at Investec Wealth & Investment, said: “A surprising move but one not without merits. It takes Tesco much further into Wholesale, giving greater certainty of supply and allowing it to extract better terms.
“Dave Lewis was confident on the call of limited CMA interference as Booker doesn’t own the stores (all franchised) and where Tesco will have no influence over pricing. However, having so much of the convenience market in the hands of a single player is bound to raise issues. Charles Wilson is seen as a major capture for Tesco and already touted as Lewis’s heir apparent.”
