Tesco-Booker Deal Done

28th February 2018


Supermarket chain Tesco has finally sealed its £4bn takeover of wholesaler Booker after shareholders of both companies approved the long-running deal that had hit stumbling blocks with regulators and investors.


The UK grocer said that just over 85% of its investors had voted in favour of the deal to buy restaurant and minimarket supplier Booker, which also owns the convenience store chain Londis and grocery retailer Budgens.


Booker’s shareholders also backed the deal on Wednesday with almost 84% approving the deal. The tie-up was expected to be rejected by some shareholders after a number of institutional investors and shareholder advisory firms had advised against it.


Schroders, a Tesco shareholder, last year questioned the logic of the grocer swallowing Booker just a few years after an accounting scandal and a record-breaking £6.4bn loss. Advisory firms including Glass Lewis and ISS had also told Booker’s investors to reject Tesco’s bid.


The deal was first announced in January 2017 but it took almost a year to get regulatory clearance, with the UK’s competition authority giving it the green light in December.  Despite protests from some of their rivals, which claimed the tie-up would put them out of business, the Competition and Markets Authority found that Tesco and Booker were sufficiently different businesses and so their combination would not harm their competitors by eroding their buying power.


Tesco and Booker said they were joining forces to pursue the of home food market, a sector analysts at Bernstein estimate is worth £85bn in the UK. Both groups believe the trend of more and more people in Britain eating in restaurants, or buying prepared salads and sandwiches to consume at work instead of cooking at home will continue. Tesco has previously said the deal could boost annual profits by £200m within three years. More than half of that will come from procurement savings.


Dave Lewis, Tesco chief executive, welcomed the results of the vote. �I�m delighted that the shareholders of both companies have supported the merger. This merger is about growth, bringing together our complementary retail and wholesale skills to create the UK’s leading food business. He added the deal would “benefit our customers, suppliers, colleagues and shareholders.”


Booker shareholders will receive a combination of 0.861 new Tesco shares plus 42.6p in cash. Based on the Tesco closing price on Wednesday of 210.8p, a rise of 1.8 per cent on the day, the deal values Booker at just over £4bn.


After the deal concludes, Charles Wilson, the chief executive of Booker, will take control of Tesco’s enlarged UK business.