Tesco has announced a deal to acquire Booker, the UK’s largest food wholesaler and owner of convenience brands such as Londis and Budgens, in a £3.7bn deal.
The deal would ensure Tesco has the UK’s biggest convenience operation, with it potentially taking on the thousands of stores Booker owns. It would also take its click and collect operation up to a potential 8,000 sites.
Booker supplies food to 450 caterers, 12,000 retailers and 900,000 small businesses including restaurant brands such as Wagamama and Carluccios. And the move to acquire the leading food wholesaler would “create the UK’s dominant food business,” according to Tesco CEO Dave Lewis.
“This deal will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders,” he claims.
“It 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.”
Tesco expects synergies from the deal, which still needs to be approved by the Competition & Markets Authority (CMA), to reach at least £200m per year by the third year after completion. It predicts this will come with a boost of at least £25m to operating profit as well as cost savings of around £175-200m.
Under the terms of the £3.7bn deal, Booker shareholders would own 16% of the combined business. The wholesale group’s chief executive Charles Wilson and its chairman Stewart Gilliland would also join the combined group’s board.
The deal follows a similar move by Tesco’s big four rival Morrisons, which last February announced plans to become a wholesale supplier to Amazon Fresh. Morrisons CEO David Potts credited the move for its market-leading Christmas performance.
According to retail analyst Steve Dresser, the Booker deal makes “good sense” for Tesco. He tweeted: “The One Stop franchise model Tesco owns has been very powerful so cornering more of the market makes good sense. [This is also Tesco recognizing] click and collect is starting to ramp up.
“There’s now more chance to push Tesco’s own label through both the convenience and wholesale chains too. Could more volume mean lower prices?”
The post Tesco looks for domination with £3.7 billion Booker deal appeared first on Marketing Week.
Source: Marketing Week
Tesco looks for domination with £3.7 billion Booker deal