Tesco’s £3.7bn Booker merger approved by CMA

By Gwen Ridler

- Last updated on GMT

Tesco’s merger with food wholesaler Booker has been approved
Tesco’s merger with food wholesaler Booker has been approved

Related tags Mergers and acquisitions

Tesco’s £3.7bn merger with food wholesaler Booker has been approved by the Competition and Markets Authority (CMA).

The decision came after an in depth examination of the deal by the watchdog, following the announcement of the merger in January this year.

The CMA concluded that the deal would not cause negative implications for Tesco’s rivals or consumers, as the two companies did not compete head-to-head in their activities.

However, since Booker supplied shops – such as Premier, Londis and Budgens – that did compete with Tesco, the watchdog said it had considered the impact carefully.

‘Free to set their prices’

“Booker does not own the shops it supplies and these retailers are free to set their prices and decide which products to stock. So, although these shops compete with Tesco, Booker cannot directly determine how they compete,”​ said the CMA.

It also examined whether the merged company could raise prices or reduce service quality at the wholesale or retail levels. It found that existing strong competition in wholesale and retail made this unlikely.

During the course of its investigation, the CMA surveyed hundreds of retailers on their use of wholesalers.

It found that most shops used more than one wholesaler and frequently switched, with a quarter of symbol group retailers and a third of independent shops switching at least once a month.

Should it raise its prices

Half of symbol group retailers surveyed and more than a third of independent retailers said they would stop buying from Booker, should it raise its prices after the merger.

Simon Polito, chair of the CMA inquiry, 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.”

Meanwhile, last week, meat firm Tulip’s acquisition of pig producer Easey Holdings was approved by the CMA.

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