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The UK’s competition regulators are sensationally set to approve Tesco’s £3.7bn takeover of Booker, without imposing conditions such as a sell off hundreds of its stores.

The Competition and Markets Authority (CMA) announced today it has provisionally concluded the deal does not raise competition concerns.

The regulator said a group of independent panel members had investigated how bringing together the UK’s largest grocery retailer and the UK’s largest grocery wholesaler would affect competition.

Having examined evidence from Tesco and Booker, as well as more than 65 wholesalers, suppliers and retail chains and a survey of hundreds of retailers, the panel found that the level of competition on the grocery wholesale and retail markets was “sufficient” to deal with the new mega merger.

It also claimed the deal could lead to increased competition in wholesale and better prices for shoppers.

The CMA found that Tesco and Booker, which supplies caterers, independent and symbol group retailers including Premier, Londis and Budgens, did not compete head-to-head in most of their activities.

In particular, it said, Tesco did not supply the catering sector to which Booker makes over 30% of its sales.

The CMA said it had investigated the impact of the merger in every local area where a Tesco and a Booker-supplied shop were both present, involving more than 12,000 shops, to examine whether in any of these areas it might be profitable for the merged company to raise prices or reduce service levels either in retail or wholesale.

The panel had provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient to defeat such a strategy.

The CMA opened its phase 1 investigation into the merger in May and the companies later requested a ‘fast track’ referral to the next stage of the investigation.

However, there has been huge opposition to the deal from the wholesale sector

In October seven of the UK’s leading wholesalers wrote a joint letter to the Competition and Markets Authority (CMA) urging it to block the deal .

The managing directors of Bestway, Bidfood, Confex, Landmark, Spar, Sugro and Today’s warned of a devastating impact on competition and warned Booker would be able to raise prices to the shops that it supplies.

The CMA found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies.

But instead of reducing competition, it said this might increase competition in the wholesale market, as well as reducing prices for shoppers.

However, the CMA also concluded that the wholesale market would remain competitive in the longer term, claiming Booker’s share of the UK grocery wholesaling market – at less than 20% – was not sufficient to justify the longer-term concerns.

“Millions of people use their local supermarket or convenience store to buy their groceries or essentials,” said Simon Polito, chairman of the CMA inquiry group. “Strong competition in the market ensures that shoppers can choose the best deal for them.

“Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”

The CMA’s will now invite further comment and evidence before coming to a final view by the end of the year.

A spokesman for Tesco said: “Tesco welcomes the announcement from the Competition and Markets Authority (CMA) that it has given provisional unconditional clearance of our merger with Booker Group.

“We look forward to creating the UK’s leading food business, bringing together our combined expertise in retail and wholesale. This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues.

“We will continue to work with the CMA as it prepares the Final Report due by the end of December. We anticipate completion of the merger in early 2018.”

A spokesman for Booker added: “Booker welcomes today’s announcement from the Competition & Markets Authority (CMA) that it has provisionally cleared the company’s proposed merger with Tesco.

“We are pleased that the CMA has provisionally concluded that this transaction does not lessen competition, and will continue to work with the CMA ahead of its publication of a final decision, expected in December.

“We are grateful for the support of customers, suppliers and colleagues during this process.”

Morning update

The City welcomed the CMA decision to wave through the £3.7bn deal, with shares in Tesco up 4.6% to 185.2p and Booker up 4.8% to 208.1p as markets opened in London. Sainsbury’s and Morrisons also rose 1.1% to 229.8p and 0.4% to 211.1p respectively.

More positive news for Tesco today as Nielsen says that the supermarket is “looking good” ahead of Christmas.

Tesco had the fastest growing sales of the country’s four biggest supermarkets for the eighth consecutive month, according to the latest retail data released today.

During the 12 weeks ending 4 November 2017, Tesco increased sales by 2.7% year-on-year, noticeably ahead of the 2.1% for Sainsbury’s, 1.8% for Morrisons, and 1.7% for Asda, Nielsen said.

“Tesco has maintained good momentum ahead of the all-important Christmas trading season,” added Mike Watkins, Nielsen’s UK head of retailer and business insight.

“They continued to attract new shoppers over the summer, who visited more often, giving a further boost to growth in the last month. At the same time, like all the supermarkets, they’ve had to tread a fine line around holding back at passing on cost price increases to compete with the discounters. Two-thirds of households now visit Tesco at least once a month and all eyes will be on whether the number one retailer can pull off another strong final quarter.”

Across the whole market, for the four weeks ending 4 November, UK grocery sales increased 3.1% year-on-year. Excluding the discounters, sales rose 1.7% while volumes fell -0.5%.

This represents a “slight slowdown” in growth – not helped by a milder October than last year – as households delay spending until after Black Friday or until all the Christmas promotions kick in later in November.

Watkins said the outlook for improving sales growth in the run-up to Christmas was positive but much depended on the success of the new advertising campaigns encouraging people to spend more.

“With Aldi and Lidl also looking to gain market share in premium food and drink, price competition across food retailers will remain intense as they compete for the Christmas purse.”

Rising prices helped supermarket sales increase in value by 3.2% year on year in the run up to Christmas, Kantar Worldpanel added for the 12 weeks to 5 November 2017.

Like-for-like grocery inflation now stands at 3.4% – its highest level since November 2013. With the average shop currently costing £18.26, consumers are now paying an extra 62p each time and over the course of a year it could add £143.70 to a typical family’s grocery bill.

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, said: “Volume sales have increased by less than 1%, meaning it’s price rises keeping supermarket performance buoyant.”

The Christmas season has begun in earnest for UK retailers, marked by a flurry of festive adverts in recent weeks.

McKevitt added that consumers have already been digging deep in preparation for the holiday season, buying 10.1 million packs of traditional Christmas biscuits in October alone.

Alcohol sales have ramped up too, increasing by 5.3% year on year as shoppers parted with an extra £142m on drinks.

The British public is expected to shell out a £28.7bn on Christmas shopping at the grocers in the final 12 weeks of 2017.

Lidl is Britain’s fastest growing supermarket for the fifth consecutive period, with sales up 15.1%. Sales at Aldi – which attracted 11.9 million households during the same period – increased by 13.1%, advancing the retailer’s market share to 6.7%.

Meanwhile Sainsbury’s grew sales by 2.6%, attracting an additional 364,000 shoppers to become the fastest growing among the big four for the first time since April 2016.

McKevitt said: “Brands were the fastest-selling products at Sainsbury’s during the past 12 weeks – particularly in soft drinks and dairy – flying in the face of the market’s focus on own-label lines. The grocer’s strongest growth came from both its Local convenience stores and online sales. Despite a positive quarter, Sainsbury’s market share fell back by 0.1 percentage points year on year to stand at 16.2%.”

Tesco welcomed 76% of British households during the past 12 weeks, growing sales by 2.3% as its market share dipped to 28.0%: down 0.2 percentage points on last year. Morrisons saw sales increase by 2.1%, accompanied by a marginal fall in share – from 10.5% last year to 10.4% during the latest quarter.

Asda enjoyed its eighth consecutive period of growth – the longest run of sales increases the retailer has seen since March 2014.

Sales at Iceland increased by 1.1%, with share falling slightly to 2% – down from 2.1% last year. Nearly half of the retailer’s growth came from categories outside its core frozen ranges, such as alcohol, which grew by 23% thanks to increased listings of WINE, lager and cider.

McKevitt added: “Amid news that Nisa’s shareholders have backed Co-op’s takeover of the group, there is plenty of room for growth: convenience stores in all their forms currently account for 12.1% of grocery sales. Nearly 60% of UK households currently visit this type of retailer, spending £3.2 billion in smaller stores during the past 12 weeks. Co-op is already the nation’s most frequently visited grocer – shoppers pop in almost twice a week on average – despite having seen sales fall by 1.5% compared to the same period last year.”

Waitrose held market share steady year on year at 5.3%, seeing sales growth across the board: from convenience stores, larger supermarkets and online. Internet specialist Ocado increased sales by 6.8%, growing ahead of the overall online grocery market.

Revenues at B&M European Value Retail (BME ) have soared 21.7% £1.3bn in the first half as the discount chain opened more stores and its range of grocery and fmcg products drove “strong” growth.

Like-for-like sales in the 26 weeks to 23 September increased 7.5% as the momentum of the first quarter, as good weather fuelled sales, continued into the second.

However, the shift towards lower margin grocery and fmcg products and end-of-season clearance activity, particularly on gardening and outdoor products, squeezed EBITDA margins in the half.

B&M said the adverse impact of the stronger US Dollar was “largely mitigated” and the chain expected gross margins to recover in the second half, in line with last year, if it achieves “satisfactory sell-through of seasonal winter product”.

Despite the pressures, group adjusted EBITDA rose 19.8% to £116.1m and pre-tax profits increased 17.8% to £86.8m.

B&M chairman Sir Terry Leahy said: “B&M has delivered an excellent performance in the first half of the financial year with strong growth in revenues, EBITDA and profit before tax.

“Our trading momentum in the UK has been maintained, driven by more shoppers seeking out value at B&M, combined with further improvements to our offer for customers particularly in ranging, pricing and store standards. We are well placed for the approaching Christmas season and we look forward to the remainder of the financial year with confidence.”

Separately, B&M announced that Leahy, who has been chairman at the business for the past five years, is to step down next year to be replaced by SuperGroup chairman Peter Bamford from 1 March.

B&M CEO Simon Arora added: “B&M continues to prosper in a challenging retail environment and our teams remain wholly focused on helping our customers spend less during uncertain times.

“Our UK business continues to go from strength to strength, with new and like-for-like stores performing exceptionally well and the acquisition of Heron has added another leg of growth to the group. We have also taken steps to enable us to push on with expanding our Jawoll business.”

B&M opened 20 new stores in the UK in the half – and said it was on track to open 50 new sites this financial year – helping UK sales rise 17.2% to £1.2bn in the half. Its Jawoll chain in German increased sales by 20.2% to £106.8m.

B&M now has 552 stores in the UK and has added 259 more thanks to the acquisition of Heron Foods in August.

Sports nutrition firm Science in Sport (SIS ) has raised £15m from a placing of shares to help raise brand awareness and drive further sales growth.

The business said it would invest in the US sports nutrition market, specifically to support online distribution, the football market and the Italian sports nutrition market.

The placing will support working capital requirements and also be used to develop distribution in online and traditional sales channels, SIS said.

In addition, the balance of the net proceeds will be used to fund working capital needs of the company.

SIS raised the £15m through the issue of up to 21,425,420 new ordinary shares at the offer price of 70p each.

CEO Stephen Moon said: “Science in Sport has quickly grown to become a leader in endurance sports nutrition for elite athletes, but our ambition is to capture a much bigger market share and to expand internationally beyond our now profitable core business.

“The US market and football present highly compelling growth opportunities and the new funds will allow us to implement our plans to increase our position and brand awareness in these markets, as well as invest in the development of our e-commerce platform.

“We are delighted with the level of support from existing shareholders and new investors, which has been demonstrated by the significantly oversubscribed placing. We believe this is a great endorsement of our strategy and path to profitability and we look forward to updating the market on our progress in due course.”

Yesterday in the City

Morrisons (MRW) and Sainsbury’s (SBRY) shares fell 2.7% to 210.2p and 2% to 227.5p respectively yesterday as the markets awaited the CMA decision on the Tesco takeover of Booker. Tesco (TSCO) nudged up 0.2% to 177p and Booker (BOK) slipped 0.3% to 198.7p.

Elsewhere Coca-Cola HBC (CCH) was one of the biggest fallers on the FTSE 100 as JP Morgan Cazenove poured cold water on the benefits of a potential deal to buy Africa’s largest Coke bottle. The investment bank downgrade of the stock saw shares in CCH plunge 4.6% to 2,467p.

There was little other market news to drive activity yesterday, but B&M European Value Retail slipped 0.4% to 391.7p ahead of this morning’s interims.

There was more profit taking at Fever-Tree (FEVR) as investors cashed in on last week’s big jumps, with shares falling 2.5% to 1,999.9p yesterday.

Other fallers included SSP Group (SSPG), down 1.8% to 586p, Dairy Crest (DCG), down 1.8% to 557p, and Marks & Spencer (MKS), down 1.6% to 314.2p.

Diageo (DGE) climbed 1.2% to 2,590p, with other risers including Unilever (ULVR), up 1% to 4,265.5p, and British American Tobacco (BAT), up 0.8% to 4,947p.

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