Tesco’s proposed merger with wholesale supplier Booker has edged closer as the £3.7bn deal was provisionally cleared by the Competition and Markets Authority.
The Competition and Markets Authority (CMA), which kicked off an in-depth investigation into the grocer’s planned acquisition of Booker in July, has provisionally concluded that the deal “does not raise competition concerns”.
The CMA said that the two businesses do not directly compete in most of their activities as Booker supplies to caterers, independent businesses and convenience store groups such as Premier, Londis and Budgens.
Tesco also does not supply to the catering sector, which makes up 30% of Booker’s sales.
Although there are more than 12,000 Tesco and Booker-supplied shops in the same local areas, the level of competition in the wider grocery sector would prohibit the merged businesses from putting up prices or decreasing the quality of service provided.
The bosses of seven of the UK’s biggest wholesale businesses including Spar called on the CMA to block the proposed merger between Tesco and Booker last month as it would “threaten the survival of the independent retailer”.
However, the industry body said today that Booker’s overall share of the wholesale market, which is less than 20%, was insufficient to justify long-term competition concerns.
Chairman of the CMA’s inquiry group Simon Polito said: “Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”
The CMA added that its clearance of the acquisition was provisional and that it was “now inviting further comment and evidence before coming to a final view”.
A statement from Tesco said: “We look forward to creating the UK’s leading food business, bringing together our combined expertise in retail and wholesale.
“This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues.
“We will continue to work with the CMA as it prepares the final report due by the end of December. We anticipate completion of the merger in early 2018.”