Tesco to merge with wholesaler Booker in major UK deal

UK – The UK’s largest retailer, Tesco, is to merge with the country’s largest wholesaler, Booker, in what the two groups have said will create ‘the UK’s leading food business’.

The combined group will ‘bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders,’ Tesco said in a statement this morning.

Under the terms of the merger, each Booker Scheme shareholder will receive 42.6 pence in cash and 0.861 New Tesco shares, meaning the merger places a value of approximately 205.3 pence per Booker share, and £3.7 billion for Booker’s ordinary share capital.

Commenting, Tesco chief executive Dave Lewis said, “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.”

Charles Wilson, chief executive of Booker added that the deal will “bring major benefits to end consumers, our customers, suppliers, colleagues and shareholders.”

Booker recently announced a sales uplift in its third quarter.

The Booker Group comprises the brands Booker Wholesale, Makro, Booker Direct, Classic Drinks, Ritter Courivaud, Chef Direct, Premier, Family Shopper, Budgens, Londis and Booker India.

Commenting, Bernstein Research said that the deal ‘gives the combined group access to a much larger market opportunity: £110b for ‘in home’ (Tesco estimate sector growth at +2.4% 2015-2018) and £85m for ‘out of home’ food (Tesco estimate sector growth at +3.8% 2015-2018).’

Clive Black of Shore Capital stockbrokers added that the boards of both Tesco and Booker have together “revealed one of the corporate surprises of the retail century so far!

First and foremost, in these leaky times, well done to both sets of management and their advisors in keeping this under wraps.”

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