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

Britain's competition regulator has given the green light to supermarket giant Tesco (Frankfurt: 852647 - news) 's £3.7-billion takeover of wholesaler Booker, it said Tuesday.

The watchdog also ruled that the move was unlikely to increase prices or reduce services in locations with both a Tesco and a Booker-supplied supermarket due to the strong competition that exists in both the grocery wholesale and retail markets.

It also decided the merger could bolster competition in the wholesale sector, rather than dent it as many of Booker's competitors argued, because the firm could benefit from improved suppliers' terms - with the savings being passed on to its own customers.

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

In particular, it found that Tesco does not supply the catering sector that accounts for more than 30 percent of Booker's sales.

They argued that Booker could raise prices to the shops it supplies.

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However, it also concluded that the wholesale market would remain competitive in the longer term, noting that Booker's share of the United Kingdom grocery wholesaling market - at less than 20 per cent - was not sufficient to justify the longer-term concerns.

However, Bernstein retail analyst Bruno Monteyne suggested it was not yet a done deal as 75% of Booker investors had to support it for the merger to go ahead.

The CMA is now inviting further comment and evidence before making its final decision by the end of December. Nisa members yesterday narrowly approved the £143 milion takeover of the chain by the Co-Operative Group, following an earlier abortive takeover by Sainsbury's.

As of 09:28 GMT, Tesco's share price had added 4.55 percent to 185.05p, outperforming the broader United Kingdom market, with the benchmark FTSE 100 index now standing 0.12 percent higher at 7,423.98 points.

Tesco welcomed the provisional findings, saying it looked forward to "creating the UK's leading food business".

"This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues".

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