Wednesday 14 November 2018

Shareholders help Tesco win its 'Booker prize'

Some of Tesco's own shareholders had accused it of overpaying. (Nick Ansell/PA)
Some of Tesco's own shareholders had accused it of overpaying. (Nick Ansell/PA)

Andrea Felsted

Shareholders from both companies yesterday approved Tesco's takeover of Booker. Some 83pc of the target's proxy votes cast were in favour of the combination, ahead of the 75pc required.

Tesco could easily have afforded to raise its £4bn (€4.5bn) offer, and that would have made the outcome less nail biting for its chief executive officer, Dave Lewis.

In the end, though, he and his board held their nerve. They judged the situation well, and have got hold of Booker for a bargain price.

Some of Tesco's own shareholders had accused it of overpaying.

It's hard to see the merits of that case. The deal was struck at a mere 12pc premium to the Booker share price immediately before the merger was announced.

However, the increase in the Tesco share price since then, plus the Booker closing dividend, means the premium has roughly doubled.

As for Booker investors, they clearly believed in the potential for Tesco's challenges to be overcome now that their capable CEO, Charles Wilson, will lead the UK business - and possibly take the top job in the future. That promise proved more alluring than the safety of Booker.

It helped that Wilson was prepared to convert his 6pc stake in Booker into about 1pc of Tesco, a move that helped convince doubters.

Bloomberg

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