Tesco in 'bold' €4.3bn move to buy UK food wholesaler Booker
Britain's biggest retailer Tesco has agreed to buy leading wholesaler Booker for £3.7bn (€4.3bn), reasserting its dominance in food with a bold move into the faster-growing catering market.
Tesco's planned takeover of Booker shows the supermarket chain's renewed confidence after two years of gradual recovery under ceo Dave Lewis following an accounting scandal.
The group also said on Friday it would restart paying dividends for the 2017-18 financial year, having not paid one to investors since the second half of its 2014-15 year when it was mired in crisis.
Mr Lewis joined in September 2014 when Tesco was rapidly losing market share and then had to deal with the accounting scandal. He has simplified the group's operations, focusing on revitalising its core grocery business in Britain, while cutting costs and selling assets both at home and overseas.
Yesterday's move marked a dramatic return to acquisition mode and signals an increased focus on its British business where it has a 28pc share of the grocery market.
"It's the next evolution of our strategy. We think it's the right time," Mr Lewis told reporters.
In a joint statement, Tesco and Booker said that together the pair would be able to address more of Britain's growing food market. Some analysts said the deal would face hurdles from Britain's competition regulators.
Mr Lewis also said that non-executive director Richard Cousins, who resigned on January 3, did not support the deal.
"The Tesco of old is back," said John Ibbotson of Retail Vision. "This is an extremely bold move and demonstrates an intent and sense of purpose that have been missing for the best part of a decade."
By adding Booker, Tesco will gain exposure to supplying Britain's cafe, restaurant and pub trade, which is growing faster than the grocery sector. Booker supplies 450,000 catering outlets including chains such as Wagamama and Carluccio's.
Booker owns about 200 cash and carry warehouses in the UK and supplies the Budgens, Londis and Family Shopper grocery chains, which are run as franchise operations.
"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," said Lewis.
Shares in Tesco traded up 8.7pc at 205.5 pence, and Booker had risen 16pc on the news.
Tesco and Booker said the deal would lead to synergies of at least £200m within three years and would boost earnings per share in the second full year of the deal.
However, analysts said the deal could face close regulatory scrutiny. "Our instant reaction is that the Competition and Markets Authority will have a field day with this," said retail analyst Nick Bubb.
But Tesco ceo Lewis and his Booker counterpart Charles Wilson, who owns about 6pc of Booker's equity, disagreed, saying their legal advice had indicated a "compelling story" to gain regulatory approval. (Reuters)