Tesco announces merger with cash and carry food wholesaler Booker in a £3.7 billion deal
- Supermarket giant says agreement will create 'UK's leading food business'
- Consumers will get 'better availability of quality food at attractive prices'
- Firms claim merger will also help independent retailers and cut food waste
- The deal announced today values Booker at £3.7billion, or 205.3p per share
Britain's biggest supermarket Tesco has merged with the country's largest cash and carry wholesale supplier Booker in a £3.7billion deal.
The companies claim the mammoth deal will give customers a 'better availability of quality food at attractive prices' and will also help independent retailers.
The agreement will create 'the UK's leading food business', cut food waste and make both companies more efficient, according to the supermarket chain.
Shaking hands on it: Booker chief executive Charles Wilson (left) and Tesco chief executive Dave Lewis (right) have reached an agreement to merge in a £3.7 billion deal
Tesco chief executive Dave Lewis said: 'Tesco has made significant progress in turning around our UK retail business.
'This merger with Booker will further enhance Tesco's growth prospects by creating the UK's leading food business with combined expertise in retail, wholesale, supply chain and digital.
'Wherever food is prepared and eaten - 'in home' or 'out of home' - we will meet this opportunity with the widest choice and best service available.'
The deal values Booker at £3.7billion, or 205.3p per share. It represents a 12 per cent premium on Booker's closing price of 183.1p on January 26.
Booker shareholders will hold 16 per cent of the combined entity and will receive 42.6p in cash, Tesco said.
Booker's chief executive, Charlie Wilson, will join the combined group's board and executive committee.
Tesco has reached an agreement to merge with food wholesaler Booker in a £3.7billion deal
The companies said the merger would 'delight consumers with better availability of quality food at attractive prices', help independent retailers and cut food waste.
Shareholders have been asked to approve the deal in a vote - and it is expected to be done by early 2018, but this is also subject to a green light from regulators.
Mr Lewis (left) and Mr Wilson agree the deal
Mr Wilson said: 'Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve.
'We believe that joining forces with Tesco offers the potential to bring major benefits to end-consumers, our customers, suppliers, colleagues and shareholders.'
Mr Lewis said the combination would result in cost savings of £175 million but stressed that it will not be 'driven by a reduction in roles'.
Mr Wilson added that there is no intention for large-scale job cuts.
Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets.
Mr Lewis and Mr Wilson brushed aside any potential competition concerns, with the Competition and Markets Authority (CMA) poised to review the deal.
The Booker boss said: 'We think it is pro competition; the CMA will go through what it does, but we've had good advice on this.'
Mr Lewis has been hailed for beginning to turn Tesco around after the disastrous reign of his predecessor, Philip Clarke, which saw profits slide, market share eroded and an accounting scandal dog the supermarket giant.
The chief executive said the Booker merger is 'another step on that same strategy'.
He said: 'We are following the customer, the market is evolving and we believe we are better able to serve the customer.'
Richard Lim, of Retail Economics, called the deal a 'game-changer'.
He said: 'Its laser-like focus on the core UK food business is cutting deeper down the supply chain. The acquisition will strengthen Tesco's wholesale and supply chain expertise while its digital capabilities will improve efficiency and provide significant cost-saving synergies.
'As shopper behaviour continues to evolve rapidly, the new group will be well placed to capitalise on home shopping and the increasingly important area of eating out which has been the growth driver of the experience economy.'
Booker is Britain's leading food wholesaler, with its group including brands such as Makro, Budgens (pictured), Londis, Premier, Ritter Courivaud and Family Shopper
Tesco has been troubled in recent years by an accounting scandal and fierce domestic competition from German-owned discounters Aldi and Lidl.
The deal sees Mr Lewis, who took the helm in 2014 when Tesco was in crisis and losing market share rapidly, switch his strategy from streamlining to acquisition.
His focus has been on reviving Tesco's main grocery business in Britain and over the last two years he has sold Tesco's South Korean arm for nearly £5billion, as well as its Turkish business and the Giraffe restaurant chain.
Yesterday, it was revealed a 'big shop' at one of the discount stores ends up costing as much as £15 less on average compared with one at one of the Big Four chains.
Retail experts Nielsen found people who buy 20 or more items at stores such as Lidl and Aldi spend £39 on average – which is about £15 less than across the Big Four - Sainsbury's, Tesco, Morrisons and Asda - where a big shop cost on average £53.
In November Mr Lewis took aim at global suppliers for considering price increases in order to prop up profits in the wake of the pound's collapse.
It came after Tesco's spat with Unilever last year, when the chain allegedly refused to bow to a 10 per cent wholesale price rise to offset a drop in sterling.
Tesco briefly withdrew cupboard staples including Marmite and PG Tips from shelves before Unilever announced that the dispute had been resolved.
In October, Tesco posted a 28 per cent fall in bottom-line pre-tax profits to £71 million for the six months to August after being hit by the sector's fierce price war.
Mr Lewis said at the time that he planned to slash costs by £1.5billion as he increased investment in its stores and the distribution network to boost profitability.
Booker is Britain's leading food wholesaler, with its group including brands such as Makro, Budgens, Londis, Premier, Ritter Courivaud and Family Shopper.
It sells branded and private-label goods to more than 500,000 customers, has 172 branches in Britain and lists about 18,000 product lines.
Read more: http://www.dailymail.co.uk/news/article-4162984/Tesco-announces-merger-Booker-3-7-billion-deal.html#ixzz4X5uzlU5n
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