Tesco's £3.7bn takeover bid for Booker provisionally cleared by CMA

The CMA is to prepare a final report on the proposed Tesco Booker merger

The CMA found that Tesco as a retailer and Booker as a wholesaler, supplying to caterers, independent and symbol group retailers, did not compete head-to-head in most of their activities.

Tesco won provisional approval for its 3.7 billion pound ($4.9 billion) takeover of wholesaler Booker from the United Kingdom competition regulator on Tuesday, moving Britain's biggest retailer closer to securing a new avenue of growth.

The Competition and Markets Authority noted that there was sufficient distinction between the two business's areas of operation to clear the deal on market competition grounds.

"My only concern would be for local suppliers that supply Bookers, will Tesco dictate what price they are willing to pay for their goods and squeeze their margins even more", says Patel.

The CMA also considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop were both present (more than 12,000 shops).

The Competition and Markets Authority (CMA) said its in-depth investigation into the tie-up found it did not raise competition concerns despite fears raised by a raft of rival wholesalers.

A raft of rival wholesalers have also raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete, according to the CMA.

The regulator concluded the would "remain competitive in the longer term", because Booker's share of the market is less than 20 percent, and therefore "not sufficient to justify the longer-term concerns". Strong competition in the market ensures that shoppers can choose the best deal for them.

The CMA began its investigation in May and launched an in-depth probe in July after Tesco and Booker asked for the inquiry to be fast-tracked. The regulator's final decision will then be published by December 26 at the latest.

The regulator denied concerns by wholesalers and symbol groups that the deal would give Tesco the ability to harm its rivals through its newly acquired wholesale arm.

Bruno Monteyne, an analyst for investment bank Sanford Bernstein covering Europe's food retail sector, said: "The argument that Tesco and Booker don't compete directly in the convenience market won". Tesco said it expects the deal to conclude in early 2018.

This week, Nisa members approved the takeover from The Co-op.

Tesco and Booker's market share prices jumped by 5.65 and 5.74 per cent respectively after the news this morning (14 November).

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