The UK’s largest retailer, Tesco, has agreed to buy the UK’s biggest food wholesaler, Booker Group, in a £3.7bn deal. The merger between the two has been lauded as the creation of the UK’s biggest “food business.”
Booker Group is the UK’s primary operator of ‘cash and carry’ business, and supplies a wide range of products to 700,000 convenience stores, grocers, pubs and restaurants.
Tesco is seeking to transform its market and expand, beyond its traditional food retailing business, with this deal allowing them to move into restaurant and food supplying markets.
Chief executive Dave Lewis, said: “Wherever food is prepared and eaten – ‘in home’ or ‘out of home’ – we will meet this opportunity with the widest choice and best service available.” Mr Lewis has also said that this deal was not motivated nor influenced by the rising prices of goods from suppliers.
One UK supermarket executive disclosed to the BBC that the Competition and Markets Authority (CMA) “may not like the idea of one company’s products in so many convenience stores”.
Satyen Dhana, of law firm CMS, claims that the CMA will have to look “very carefully” at the deal.
Dhana said: “Whilst Tesco and Booker do operate in largely different segments, the CMA is likely to examine where the parties overlap and if the enhanced new business becomes a must-have trading partner for customers and suppliers. “Tesco may not be owning any more stores, but potentially it becomes a key supplier to a large number of independent convenience stores that may compete at the local level with its own stores. “Suppliers of goods to Tesco and Booker may also want the CMA to consider if the transaction now combines two of their largest customers.”
The CMA has declined to comment on the matter, saying that it does not talk about potential investigations.