Booker chief executive Charles Wilson has claimed this week’s seismic decision by the CMA to clear the way for its takeover by Tesco will allow the combined business to take the grocery war to Aldi and Amazon.
As he celebrated the authority’s provisional clearance for the £3.7bn merger, Wilson told The Grocer the most significant outcome was allowing Tesco-Booker to compete with new rivals on the block.
He also said the CMA was right to conclude that the merged company would have too small a grip on the convenience market to put the squeeze on suppliers, as well as its conclusion that the deal would result in better prices for consumers.
The CMA declared the merger of Tesco and Booker - despite its armoury of 3,000 Tesco stores across the UK, and Booker supplying over 5,000 under the Premier, Londis, Budgens and Family Shopper brands - was not big enough to seriously lesson competition in the sector.
The regulator also said it was set to approve Tesco’s takeover without any remedies whatsoever. Many had expected the retailer to be forced to sell off hundreds of stores, or possibly even offload its entire One Stop chain, after initial fears were raised by the CMA relating to competition in 350 hotspots where Tesco and Booker stores overlapped.
“What excites us is that in creating the UK’s leading food and drink business, it will allow us to compete against the Aldis and Amazons.”
But the CMA’s independent panel found the level of competition in the grocery wholesale and retail markets was “sufficient” to deal with the new mega merger, claiming the deal could lead to increased competition in wholesale and better prices for shoppers.
“It’s great news,” said Wilson, responding to the preliminary findings. “What excites us is that in creating the UK’s leading food and drink business, it will allow us to compete against the Aldis and Amazons.”
Wilson and Tesco CEO Dave Lewis have always argued it would be madness for them to try to reduce competition in the market, either in wholesale or retail. “The CMA didn’t see an incentive for us to offer worse choice, price and service,” said Wilson.
“What they’ve actually done is say the way they’re reading this is if independents receive better terms, it’s inevitable that some will be passed on to the consumer.
“Also, Booker customers represent less than 20% of the convenience market. So they do not materially expect these levels of supply to have a waterbed effect. The benefits from the deal will pass through to the consumer and because of our market share the risk is not as significant as people made out.”
Read more: CMA approves Tesco-Booker takeover - timeline
With 38% of Booker’s £5bn sales in foodservice, Wilson also claimed the CMA’s decision showed it understood the significance of the deal for Tesco outside the convenience sector. “That’s where this deal is different from the likes of Nisa/Co-op, which are much more about local convenience store retailing.”
As a result, the CMA’s provisional findings would not necessarily apply to the Nisa/Co-op deal. “It’s all in the detail of how they operate.” .
In another twist on the takeover, The Grocer this week learnt the CMA backed down amid huge pressure from Tesco and Booker on its initial refusal to take the rise of the discounters into consideration.
In August Tesco and Booker slammed the CMA’s original decision to exclude the discounters from its calculations regarding the competitor set, despite their prolific growth.
The CMA will still consider feedback from the industry on this week’s provisional findings and it faces a strong backlash from opponents in the wholesale sector.
Most outspoken was Landmark managing director John Mills who said he would be willing to “lay down in front of the tanks” - a reference to the 1989 Tiananmen Square protests - if Tesco’s takeover of Booker is given the go-ahead.
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