Tesco-Booker merger faces in-depth probe

Tesco’s proposed merger with Booker is set to be investigated “in depth” by the Competition and Markets Authority, the CMA confirmed today.

Booker CEO Charles Wilson with Tesco CEO Dave Lewis

The surprise £3.7 billion merger between the UK’s largest supermarket and biggest food and drink wholesaler, which was first announced in January, would make it the UK’s largest food and drink business, boosting Tesco’s considerable buying power across grocery, including beer, wine and spirits, and giving it access to Booker’s network of local depots, cash and carries and fleet of vehicles, .

Tesco is the largest drinks retailer in the UK, with a market share of around 25%, while the wholesaler supplies beers, wines and spirits and food to independent grocers, convenience retailers, off-licenses, corner shops, local pubs and restaurants, as well as over 5,000 symbol franchisees under the Premier, Londis and Budgens fascias.

When the deal was announced, Booker CEO Charles Wilson has said the deal will open up greater choice for customers, but there were fears that the merger would allow Tesco to monopolise supply in the market, particularly given it has its own convenience estate, which includes Tesco Metro and One Stop.

The CMA started an initial investigation into the deal at the end of May to see whether the tie-up was likely to curb choice for customers, but today it confirmed this will become a full-scale probe, after saying it believed that shoppers could face worse terms when buying groceries in more than 350 local areas where there is currently an overlap between Tesco stores and Booker-supplied ‘symbol’ stores. It added that there were concerns that, after the merger, there was the potential for Booker to reduce the wholesale services or terms it offers its symbol store customers, in order to drive shoppers to their local Tesco.

During phase 2 of the investigation, the CMA will conduct further research and analysis on whether the deal could potentially reduce competition, as well as seeking the views and evidence from those potentially affected by the merger. Its findings will be published by Christmas.

When it announced the deal, Tesco argued there were “synergies” that could be unlocked by the deal, which will give it access to Booker’s network of local depots, cash and carries and its fleet of vehicles, as well as enabling Tesco to enter the fast-growing out-of-home food consumption market. It has since reiterated its commitment to the deal, despite some opposition from shareholders.