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Tesco takeover of Booker gets go-ahead

14 November 2017

Tesco won provisional approval for its proposed 3.7 billion pound (US$4.9 billion) takeover of wholesaler Booker from the United Kingdom competition regulator on Tuesday, moving Britain's biggest retailer closer to securing a new avenue of growth.

A group of independent CMA panel members considered the possible implications of the merger in every local area where a Tesco store and a Booker-supplied shop were present, totalling over 12,000 shops.

Booker's increased clout would potentially allow it to negotiate better terms from its suppliers, which could be passed on as lower prices to the shops it supplies, the investigation found.

The Competition and Markets Authority has provisionally cleared Tesco's £3.7 billion merger with the cash-and-carry group Booker.

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.

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

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

The U.K. regulatory body referred the merger for further investigation in July as it believed the deal could lead to worse terms for shoppers. It concluded that there was sufficient competition in both the wholesale and retail markets to ensure the deal would not mean higher prices or reduced service. At the end of June, the companies requested a 'fast track' referral to the next stage of the investigation.

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", Tesco said in a statement.

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 welcomed the decision and said the deal was expected to complete in early 2018.

Tesco takeover of Booker gets go-ahead