Tesco ‘committed to’ Booker deal

29th March, 2017 by Arabella Mileham

Tesco said it remained committed to its merger with Booker, despite warnings from two of its shareholders that the deal is too costly.

In January, the retailer announced its surprise £3.7 billion merger deal with Booker, the UK’s biggest food wholesaler, which is anticipated to make it one of the UK’s leading food business. As part of the deal, Booker’s highly regarded CEO Charles Wilson will join the board of Tesco, but the merger also seems to have signalled the departure of Tesco senior non-executive director, Richard Cousins at the start of January.

In a statement this week, a Tesco spokesman said it always listened closely to the views of its shareholders, but said that after working on the deal for more than 12 months, it believe the strategic and financial rationale was “compelling”.

“We are confident that it will enhance our recovery plans for Tesco and deliver substantial benefits to customers and shareholders,” they said.

The retailer argued that move would unlock “more synergies than Booker’s operating profit for the 2016 financial year and deliver a return in excess of our cost of capital in the second year” while strategically, it would enable Tesco to enter the out-of-home food consumption market, which was growing fast.

“Since announcing the transaction the majority of our top 10 shareholders have chosen to increase their shareholding in Tesco and we hope to convince all our shareholders of the merits of the transaction,” they said.

The wholesaler stocks a large selection of beers, wines and spirits, and Wilson has said the deal will open up greater choice for independent convenience retailers and off-licenses. However there have been fears that it will allow Tesco to monopolise supply in the market, particularly given its own convenience estate, which includes Tesco Metro and One Stop.

Booker currently has around 125,000 retail customers, which including supplying more than 5,400 independent retailers in the UK who are Premier, Londis, Budgens or Happy Shopper franchisees.

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