Tesco’s £3.7bn merger with Booker has today (November 14) been provisionally cleared by the regulator.
The Competition and Markets Authority (CMA) said the deal could even increase competition in the wholesale market and reduce prices for shoppers.
Tesco and Booker ‘did not compete head-to-head in most activities’, it added, saying that More than 30% of Booker’s sales are to the catering sector, which Tesco does not supply.
The CMA concluded that the wholesale market would “remain competitive in the longer term”, because Booker’s share of the UK grocery wholesaling market, at less than 20%, “was not sufficient to justify the longer-term concerns”.
The regulator also said that Tesco would not have to sell any of its stores for the deal to go through.
The CMA found that it was “likely Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies”.
“This might increase competition in the wholesale market, as well as reducing prices for shoppers.”
Simon Polito, chair of the CMA’s inquiry group, said: “Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”
Tesco and Booker both welcomed the CMA’s provisional decision and added that they would continue to work with the competition regulator, which is due to publish its final report by the end of the year.
Booker said it was “pleased that the CMA has provisionally concluded that this transaction does not lessen competition”.
Tesco said it anticipated the merger would be completed in early 2018.
Tesco’s shares rose by 4.5% this morning and Booker’s were up by 4.7% on news of the CMA’s decision.
We’ll have more on this story in the December issue of Wholesale News.