Tesco’s £3.7 billion purchase of wholesaler Booker will be the subject of an in-depth investigation, the UK competition authority has announced this morning.
The Competition and Markets Authority (CMA) believes that in more than 350 areas where there is an overlap between Tesco shops and Booker-supplied stores, shoppers could face worse terms when buying their groceries.
There are concerns that after the merger there is potential for Booker to reduce the wholesale services or terms it offers the ‘symbol’ stores it currently supplies, in order to drive customers to their local Tesco.
The phase two investigation will assess whether the deal could reduce competition by conducting further research as well as seeking evidence from those potentially affected by the merger. It is estimated that the probe will be completed by Christmas.
Tesco announced the deal in January as it aims to work more closely with its suppliers to strengthen its own-brand and fresh food ranges. Booker owns the Premier, Londis and Budgens convenience stores and the deal, if approved, would create one of the largest food businesses in the country.
A Tesco spokesperson said this morning: “This merger has always been about growth, and we remain convinced that it will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers and colleagues.”
Adding Booker would boost Tesco’s access to the foodservice sector at a time when it faces growing pressure from discounters Aldi and Lidl. Tesco’s shares plummeted last month following Amazon’s purchase of organic food specialist Whole Foods for $13.7 billion.
Tesco’s main rival Sainsbury’s also intends to branch out as it eyes a £130 million takeover of convenience store operator Nisa.
Tesco operates more than 3,000 stores across the UK and is the country’s largest supermarket. Booker supplies services to over 5,000 stores.
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