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Tesco to buy Budgens and Londis owner Booker Group Tesco to buy Budgens and Londis brand owner Booker
(35 minutes later)
The UK's biggest supermarket group, Tesco, has agreed to buy the UK’s biggest food wholesaler, Booker Group, in a £3.7bn deal.The UK's biggest supermarket group, Tesco, has agreed to buy the UK’s biggest food wholesaler, Booker Group, in a £3.7bn deal.
The firms said the deal would create the "UK's leading food business".The firms said the deal would create the "UK's leading food business".
Booker Group is the UK's largest cash and carry operator, and supplies everything from baked beans to teabags to 700,000 convenience stores, grocers, pubs and restaurants.Booker Group is the UK's largest cash and carry operator, and supplies everything from baked beans to teabags to 700,000 convenience stores, grocers, pubs and restaurants.
Booker also owns the Premier, Budgens and Londis convenience-store brands.Booker also owns the Premier, Budgens and Londis convenience-store brands.
Live: Reaction to Tesco dealLive: Reaction to Tesco deal
What does Booker Group do?What does Booker Group do?
By combining with Booker Group, Tesco is expanding beyond its traditional food retailing business and making strides into the restaurant and takeaway food sectors.By combining with Booker Group, Tesco is expanding beyond its traditional food retailing business and making strides into the restaurant and takeaway food sectors.
"Wherever food is prepared and eaten - 'in home' or 'out of home' - we will meet this opportunity with the widest choice and best service available," said Tesco chief executive Dave Lewis."Wherever food is prepared and eaten - 'in home' or 'out of home' - we will meet this opportunity with the widest choice and best service available," said Tesco chief executive Dave Lewis.
Mr Lewis said rising prices from suppliers had played no part in the decision to sign the deal.Mr Lewis said rising prices from suppliers had played no part in the decision to sign the deal.
Speaking to the BBC's Today programme, Mr Lewis said he believed the transaction would not face a challenge from competition authorities, as it would not result in Tesco owning any more stores, and he dubbed it a "low risk" merger.Speaking to the BBC's Today programme, Mr Lewis said he believed the transaction would not face a challenge from competition authorities, as it would not result in Tesco owning any more stores, and he dubbed it a "low risk" merger.
But others were not so sure. One UK supermarket executive told the BBC the Competition and Markets Authority (CMA) "may not like the idea of one company's products in so many convenience stores".But others were not so sure. One UK supermarket executive told the BBC the Competition and Markets Authority (CMA) "may not like the idea of one company's products in so many convenience stores".
Satyen Dhana, a competition partner with law firm CMS said the CMA will look " very carefully" at the deal. Satyen Dhana, a competition partner with law firm CMS said the CMA will look "very carefully" at the deal.
"Whilst Tesco and Booker do operate in largely different segments, the CMA is likely to examine where the parties overlap and if the enhanced new business becomes a must-have trading partner for customers and suppliers."Whilst Tesco and Booker do operate in largely different segments, the CMA is likely to examine where the parties overlap and if the enhanced new business becomes a must-have trading partner for customers and suppliers.
"Tesco may not be owning any more stores, but potentially it becomes a key supplier to a large number of independent convenience stores that may compete at the local level with its own stores."Tesco may not be owning any more stores, but potentially it becomes a key supplier to a large number of independent convenience stores that may compete at the local level with its own stores.
"Suppliers of goods to Tesco and Booker may also want the CMA to consider if the transaction now combines two of their largest customers," Mr Dhana added."Suppliers of goods to Tesco and Booker may also want the CMA to consider if the transaction now combines two of their largest customers," Mr Dhana added.
A spokesman for the CMA said: "We do not comment on potential investigations."A spokesman for the CMA said: "We do not comment on potential investigations."
Analysis: Rob Young, BBC business reporter Retailers are eyeing the deal with interest.
The tie-up between Tesco and Booker Group will create a food giant that not only sells products in supermarkets but in tens of thousands of independent retailers, some of them Tesco's rivals, and in hundreds of thousands of cafes and restaurants. James Lowman, chief executive of the Association of Convenience Stores said the merger is "hugely significant".
The deal is likely to attract the attention of the competition authorities. "Some retailers will welcome this news, others will be concerned about competing with stores supplied through the merged Booker and Tesco business, and some will be uneasy at the prospect of working in partnership with one of their biggest historical competitors."
In recent years, Tesco has been in crisis, losing market share in the tough retail market and selling off or closing parts of the company.
Tesco has sold its South Korean arm, its Turkish business and the Giraffe restaurant chain. Today sees a change of tack for the company.
Not only is it expanding again, it also plans to resume its dividend payment next year - a sure sign the company sees a brighter financial future.
New strategiesNew strategies
Investors welcomed the surprise announcement, sending Tesco's shares up 10% in morning trade.Investors welcomed the surprise announcement, sending Tesco's shares up 10% in morning trade.
Under the terms of the cash and shares deal, Booker shareholders will end up owning about 16% of the combined group.Under the terms of the cash and shares deal, Booker shareholders will end up owning about 16% of the combined group.
"The deal with Booker shows Tesco is not going to sit on its hands and wait for its dominant market position to slowly leak away to competitors," said Laith Khalaf, senior analyst at Hargreaves Lansdown."The deal with Booker shows Tesco is not going to sit on its hands and wait for its dominant market position to slowly leak away to competitors," said Laith Khalaf, senior analyst at Hargreaves Lansdown.
"The UK's supermarkets are engaged in new strategies to cope with the brave new world, where the discounters have stolen market share and consumers have turned away from big superstores, preferring instead to do their shopping in convenience stores or on their mobile phones."The UK's supermarkets are engaged in new strategies to cope with the brave new world, where the discounters have stolen market share and consumers have turned away from big superstores, preferring instead to do their shopping in convenience stores or on their mobile phones.
"Sainsbury bought Argos, Morrisons is flirting with Amazon, and now Tesco has revealed its plans to drive further growth.""Sainsbury bought Argos, Morrisons is flirting with Amazon, and now Tesco has revealed its plans to drive further growth."