Supermarket giant Tesco has announced that it has agreed a deal to buy the UK's leading food wholesaler Booker Group in a £3.7 billion deal, creating what the firms have described as the UK's leading food business.
According to the companies, the recommended share and cash merger will lead to benefits across the board – for consumers and independent retailers to suppliers and colleagues, while delivering "significant value" to its shareholders.
Booker Group is the country's largest cash and carry operator, while it also owns the convenience store brands Budgens, Londis and Premier.
"The combined group will be well placed to serve the large, established 'in home' food market as well as the faster-growing 'out of home' food market," a joint statement read. "By bringing together Tesco and Booker's retail and wholesale expertise, supply chain and digital capabilities, the combined group will be able to provide greater choice, quality, price and service in the food market, whilst improving efficiency and reducing food waste.
"The combined group will bring together the capacity and capability to generate new growth and deliver significant revenue and cost synergies," they added.
The merger will result in Booker shareholders owning approximately 16 per cent of the combined group, the statement confirmed.
Tesco's board expects pre-tax synergies for the combined group to reach a run-rate of "at least £200m per annum" by the end of the third year following the completion of the merger – with a "significant opportunity" for further revenue synergies in the future.
Commenting on the announcement, Tesco chief executive Dave Lewis said: “Tesco has made significant progress in turning around our UK retail business. 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. 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."
In addition, Lewis told the BBC that he considered the merger "low risk", believing that the deal would not face resistance from competition authorities due to the fact Tesco would not own any more stores.
Charles Wilson CEO of Booker, added that he felt the deal would bring "major benefits" to stakeholders.
"Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve," he said. "We believe that joining forces with Tesco offers the potential to bring major benefits to end consumers, our customers, suppliers, colleagues and shareholders.”