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Regulators Approve Tesco's $4.95 Billion Acquisition of Booker

Regulators Approve Tesco's $4.95 Billion Acquisition of Booker

Wednesday, December 20th, 2017

Tesco’s recently-announced 3.7 billion-pound ($4.95 billion USD) acquisition of major U.K. food distributor Booker overcame its final hurdle this week when the Competition and Markets Authority approved of the two companies’ merger. The move, orchestrated by Tesco Chief Executive Dave Lewis, is expected to be a boon to the retailer—granting the company quick access to the faster growing catering segment of Britain’s 195 billion pound food market.

Tesco and Booker announced their prospective transaction in January, and the transaction is expected to be approved by both companies’ shareholders in February of 2018.

Though some analysts have argued that the retailer was overpaying for the takeover, others disagree, according to a recent Reuters article.

Laith Khalaf, Analyst, Hargreaves Lansdown“Lewis’ hand has recently been strengthened by a healthy set of half-year results, which included the resumption of a dividend. That may well be enough to get the shareholder base on board with the deal,” said Hargreaves Lansdown analyst Laith Khalaf in Reuter's report.

This move is expected to shift Tesco’s influence into Britain’s "out of home" food market, which, the news source reports, is an area growing faster than the "in home" market. Tesco will instantly earn access to Booker’s footprint in the catering industry, serving roughly 450,000 caterers and out-of-home customers, as well as retailers like Caluccios, Wagamama, and Byron. Booker also brings 200 cash and carry warehouses and the 120,000 retailers it supplies to the dealincluding Premier and Family Shopper convenience chains run by the franchise’s operations.

Regulators have approved Tesco's acquisition of Booker Wholesale

Tesco’s takeover of all these beneficial aspects was provisionally cleared in November by the CMA after an investigation that started in May, much to the dismay of competing retailers who were hoping to divest some aspects of the takeover.

Simon Polito, Chair, CMA Inquiry Group“Retailers have told us that they shop around for the best prices and service from their wholesaler, and we are confident that this will continue after Tesco buys Booker,” said Simon Polito, Chair of the CMA inquiry group, in the same Reuters article.

As of 11 pm PST on December 19th, 0.861 new Tesco shares and 42.6 pence in cash are being offered by Tesco for every Booker share. As of 1233 GMT, Tesco shares were up 0.3 percent, and Booker’s shares were up 0.5. On this note, though, Tesco shares are flat so far this year, while Booker’s are up 31 percent.

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