Tesco and Booker in shock merger announcement

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Tesco and Booker have stunned the industry this morning with the announcement of a £3.7bn merger plan.

The merger, which is subject to regulatory approval and also approval by Tesco and Booker shareholders, is described as being able to deliver synergies of £200m within three years, of which £175m will be cost and £25m revenue. Booker and Tesco estimate that 55% of the cost synergies (£96m) would come through improved buying power, with 35% realised through distribution and fulfilment. It would also give Tesco the obvious benefit of a strong presence in the out-of-home eating market.

The position of Booker retail customers in the new set-up is unclear, but initial statements surrounding the merger claimed that, outside of broad scale benefits, retail customers would see a significant improvement in delivery service via use of Tesco’s range and delivery fleet, plus access to Tesco banking and mobile services.

The presentation to business analysts described the move as “unlocking growth”, promising a more innovative offer for customers and consumers, as well as enhancing choice, price and service for independent retailers and small businesses.

Each Booker shareholder will receive 0.861 Tesco shares and 42.6p in cash per Booker share, which values Booker at £3.7bn and gives Booker shareholders approximately one sixth of the enlarged group.

On completion, Booker ceo Charles Wilson and chairman Stewart Gilliland will join the combined group’s board.

Retailers have begun reacting to the news on social media. Premier retailer Sam Coldbeck, of Wharfedale Convenience in Hull, tweeted: “With [chief executive] Charles Wilson at the helm of Booker, retailers will be in safe hands as we navigate Tesco waters. Exciting times.”

But Thornton’s Budgens in Belize Park London, owned by Andrew Thornton, tweeted: “Shocked by news that Tesco buying our wholesaler Booker. Will fight for all we stand for and to retain our independence.”

Further updates to follow.

Readers' comments (5)

  • The way to stand up for the independent sector is to join Nisa. There can be no long term benefit in buying from your biggest competitor.

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  • According to one report, Tesco and Booker have been talking for a year. This means that Booker moved just six months after buying Musgrave out. Interesting.
    What next? Amazon Go buys Tesco?

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  • As analysts have already noted not only does this tighten Tesco dominance in the sector but with 'One Stop' already a part of the business as a franchise where does this leave Booker symbol brands?

    There may well be supply chain benefits such as fresh which has always been an issue for independents, but I shall be interested to see the CMA take on the deal.

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  • What a shame CW is not closer to the ground. I waited a year before leaving Premier thinking the Londis deal would help my fresh delivery schedule and range. My store is no more than 2 miles away from my local booker depot in York. They would not deliver every 3 days (like Nisa&P&H) without a min £1k spend. I constantly tried to get a better arrangement but ultimately NO was still the answer. One senior manager told me he didn't have time to travel from Northampton (his base) to see me when I said I was leaving. They offered me "shop locally" a pathetic attempt at promotional activity for lower spending customers. Those in the know are aware that you are tied to your local depot for delivery - Regional distribution is useless - how does this merger change that? I suspect as with Londis it will not. They will argue they can now tap in to Tesco and Londis supply chain? Hmm - I was part of the Costcutter switch to P&H from Nisa what a shambles and that continues to be.
    One last point - £13k per annum minimum I spend on milk - and still the regular delivery routine (2miles away) could not be achieved but Nisa - Scunthorpe to York no problem
    Good luck CW at least your on the joint board!!!

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  • RUMOUR HAS IT THAT THE MIGHTY TESCO ARE IN ADVANCED TALKS WITH ANOTHER WHOLESALER.FROM WHAT I AND OTHERS HAVE HEARD, THIS IS ALMOST A DONE DEAL.

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