The UK’s competition regulator has referred Tesco’s proposed £3.7bn (€4.17bn) takeover of wholesaler Booker for a detailed investigation, granting a request from the companies to “fast track” the process.
Booker announced the cash and shares deal in January and the UK’s Competition and Markets authority formally started a phase 1 review in May. Last month, Tesco and Booker asked the authority to move swiftly to a more in-depth phase 2 examination.
The authority said it believed in over 350 local areas where there was an overlap between Tesco shops and Booker-supplied independent grocery retailers, shoppers could face worse terms when buying products.
It said there were concerns that if the deal was cleared, there was potential for Booker to reduce the wholesale services or terms it offers the stores it currently supplies, to drive customers to their local Tesco.
Booker supplies services to over 5,000 ‘symbol’ stores, operating under the Premier, Londis, Budgens or Family Shopper brands. It also supplies restaurants such as Wagamama and Carluccio’s and operates the Makro cash-and-carry business. Tesco runs more than 3,000 stores across the UK.
The authority said other concerns were raised and considered in the initial probe, but it had not found it necessary to conclude on all of these given the referral.
The regulator will now assess whether the deal could reduce competition by conducting further research and analysis as well as seeking views and evidence from all those potentially affected by the deal. The authority’s in-depth phase 2 investigation lasts 24 weeks, following an earlier provisional findings report.
The transaction will be cleared if the phase 2 inquiry does not find it will reduce competition. If competition is seen to be affected, the authority can either seek remedies or block the deal.
Tesco sees the deal as a new source of growth given Booker’s role as a major distributor to the catering industry.
Tesco said that it was pleased the authority had accepted its fast-track request. Shares in Tesco and Booker were little changed.
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