Rival wholesalers are weighing up an appeal after Tesco’s £3.7bn takeover of cash-and-carry giant Booker was waved through unchecked by the competition authorities.
In October, the bosses of seven of the UK’s largest wholesalers jointly wrote to the CMA arguing the deal would hand Tesco “incontestable power over the procurement of all grocery categories in the UK”.
But on Thursday, the Competition and Markets Authority said the combination of the UK’s biggest retailer and grocery wholesaler, respectively, did not raise competition concerns.
Simon Polito, chair of the inquiry group, said: “We have carefully listened to feedback from retailers and wholesalers who operate in what are highly competitive UK retail and wholesale sectors. Retailers have told us that they shop around for the best prices and service from their wholesaler, and we are confident that this will continue after Tesco buys Booker.”
The clean bill of health given to the deal surprised analysts and retail rivals who had expected the CMA to at least insist on some store disposals. Tesco has 3,200 UK stores, while Booker supplies 117,000 independent retailers, a headline figure that includes the 5,500 retail stores under its brands Premier, Londis, Budgens and Family Shopper.
The consolidation deal comes at a time of upheaval in the wholesaling industry. Last month struggling grocery and tobacco wholesale Palmer & Harvey plunged into administration, while the shopkeeper owners of Nisa recently agreed to a £143m takeover by the Co-op.
Steve Parfett, chairman of AG Parfett & Sons, described the CMA’s verdict as disappointing. “The whole decision is perverse,” he said.
The Stockport-based wholesaler is a member of the Landmark Wholesale buying group, which was one of the seven signatories to the CMA letter.
Parfett said several members of that group were discussing getting a legal opinion on whether to appeal. Aggrieved parties have a month to contact the competition appeal tribunal with their case.
Parfett has also sought the support of MPs in the constituencies where Booker has depots, with Sefton Central MP Bill Esterson tabling a question for Greg Clark, the business secretary, focused on the pricing advantage the deal will give Booker over wholesaler rivals.
Tesco welcomed the CMA’s decision, with both sets of shareholders due to vote on the takeover at meetings in February. The deal, which is creating a retail and wholesale giant with a turnover approaching £60bn, will then complete in March.