Tesco embarks on an enormous expansion by buying Britain’s biggest food wholesaler, Booker Group.
The £3.5 billion deal will expand Tesco’s remit beyond retailing and into the restaurant and takeaway sectors.
Their muscles has been flexed and the industry has been reminded that Tesco will not sit back and watch profits leak to competitors.
With Tesco shares up 10% following the surprise announcement, investors are excited by the merger.
The terms of the deal will leave Booker shareholders owning approximately 16% of the combined group.
Booker Group is the country’s largest cash and carry outfit, supplying produce to 700,000 grocers, convenience stores, restaurants and pubs.
They also own well-known brands; Premier, Budgens and Londis.
Tesco chief executive Dave Lewis has promised: ‘Wherever food is prepared and eaten – at home or out of home – we will meet this opportunity with the widest choice and best service available.’
There is however, concern over competition.
Although Mr Lewis has described the merger as ‘low-risk’ because it will not result in Tesco owning more stores, others believe that the Competition and Markets Authority (CMA) may not like the prospect of one company’s products in so many stores.
The CMA is likely to investigate the extent to which these parties overlap and if the merger will result in the company becoming a ‘must-have’ trading partner for customers and suppliers alike.
This prospect is particularly worrying for businesses that may now have to work with Tesco despite being historical competitors.
It seems Tesco have brought their slogan to life – every little merger certainly does help.