Tesco to acquire wholesaler Booker in £3.7bn deal

Tesco has reached an agreement to buy Booker, the UK’s largest wholesaler and owner of the Londis and Budgens brands, in a £3.7bn deal.

The two companies are aiming to create the UK’s leading food business as a result of the merger, but it is likely to attract the attention of competition authorities.

The move follows rival supermarket Sainsburys’ takeover of Argos and Habitat owner Home Retail Group, which completed in September 2016.

The property industry has welcomed the merger. Colliers’ head of retail capital markets, James Watson, said: “The supermarket sector has experienced extensive M&A activity of late for a variety of reasons, but mainly in response to changes in consumer behaviour. The proposed merger between Tesco and Booker shows a return in focus by Tesco on good old market share.

“This deal offers both parties access to new markets and increased turnover. However, the Competition and Market Authority are bound to have something to say about it.”

Tim Vallance, head of UK Retail at JLL, also said it was good news for the grocery sector. “In choosing to tie up with Booker, Tesco is ensuring that it is able to cater for a wider variety of consumers across many  different channels. This is part of a wider trend for grocers and retailers more generally to seek growth through large mergers and acquisitions rather than through organic store by store or smaller acquisitions.

“We can’t pretend that 2017 won’t be a tough year for retailers with headwinds including rising costs and falling  consumer confidence, however those that are innovative and customer-centric will remain resilient and prosper and we expect to see further similar activity amongst the big four as they continue to vie for domination of the sector and adapt to the evolving way people shop.“

Tesco shares jumped more than 10% to 208pin morning trading as investors welcomed the news.

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