Shareholders will vote on Tesco’s £3.7 billion acquisition of wholesale giant Booker this week as chief executive Dave Lewis hopes to seal the deal to create the UK’s largest food business.
Investors at both Tesco and Booker will hold separate meetings on Wednesday 18 February to vote on the takeover, which needs 75 per cent backing from Booker investors to proceed.
Doubts have been growing over whether the deal will receive sufficient approval, with Tesco criticised by some advisory groups for undervaluing the wholesaler, which owns Londis and Budgens.
Advisory firms Glass Lewis and Institutional Shareholder Services have urged Booker investors to oppose the deal, with the latter saying the transaction “does not warrant support at the current terms”.
Meanwhile, investor Sandell Asset Management, which owns a 1.75 per cent of Booker, is pushing for a higher offer from Tesco. It claims the wholesaler is worth between 255p and 265p a share – considerably more than the 205.3p offered.
In a note reported by City AM, ISS said: “In essence, the merger presents attractive growth opportunities and strong rationale for Tesco underpinned by significant expected synergies, while the rationale for Booker shareholders to give up control appears less-than-compelling at the relatively low premium offered.”
ISS added that Tesco appeared to be “getting the better deal”.
Despite the dissent, Tesco’s bid was bolstered last week when it received backing from two leading investors, namely Investec and Invesco Perpetual.
The former is a top-15 Booker investor, holding a 2.2 per cent stake in the company, while the latter is one of the wholesaler’s top 20 investors.
In addition, advisory firm Pensions Investments and Research Consultants (Pirc) has urged shareholders to back the merger, according to City AM.
Tesco received approval for the takeover from the competition watchdog in December, and recently announced that Booker boss Charles Wilson would head up Tesco’s UK retail operations after the acquisition.
Tesco is the UK’s biggest supermarket, with over 3,000 stores, while Booker is the country’s largest wholesaler.