UK Watchdog Clears Tesco's GBP3.7 Billion Booker Acquisition

It also decided the merger could bolster competition in the wholesale sector, rather than dent it as many of Booker's competitors argued, because the firm could benefit from improved suppliers' terms - with the savings being passed on to its own customers. The CMA has provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient to defeat such a strategy.

The regulator said that the two companies don't compete head-to-head in most of their activities, stressing that Tesco doesn't supply the catering sector where Booker makes more than 30% of its sales.

In July, the competition watchdog launched a full-scale investigation into the proposed merger, citing concerns that in more than 350 local areas "shoppers could face worse terms when buying their groceries".

The Competition and Markets Authority (CMA) said the deal could even increase competition in the wholesale market and reduce prices for shoppers.

The CMA said the competitive landscape looked generally rosy because Booker had less than a 20% share of the United Kingdom grocery wholesaling market. At the end of June, the companies requested a 'fast track' referral to the next stage of the investigation.

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.

This is a provisional decision and the CMA is now inviting further comment and evidence before coming to a final view.

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".

'This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues'.

Booker, in its statement, said it will continue to work with the competition regulator ahead of its final decision, which is due in December.

Tesco expects to complete the merger in early 2018.

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