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The financial prospectus was published yesterday for potential investors in the combined Tesco / Booker business. In amongst the 368 pages of financial tables, legal statements and directors’ bonuses, there are some interesting pieces of “forward guidance” for the merged group.

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The UK Competition and Markets Authority (CMA) has published its final findings on the potential competition effects of the merger between Tesco and Booker, the UK's largest grocery retailer and the UK's largest grocery wholesaler respectively. Reiterating the findings of the provisional report in November, this report gives the formal go-ahead for the deal, which will create a business with joint sales over £61bn. Following submission to shareholder approval in February, it is expected the deal will complete in March 2018.

No remedies required

Following the conclusions reached in the provisional report the CMA has not identified any disposals, of other actions from the parties necessary to progress the tie-up. In its analysis the CMA points to the 'vertical' nature of the relationship between Tesco and Booker, reasoning that being retailer and wholesaler respectively, "there is very little direct head-to-head competition between them", and suggests that rather than damaging competition these sorts of mergers even "may lead to efficiencies which may result in benefits to customers."

Collapse of P&H requires no change to decision

Following the fall of, Booker competitor, Palmer & Harvey into administration on 28 November (after the publication of the provisional findings) the CMA has considered what this has meant for the inquiry, and for competition at the wholesale level. It has concluded that as significant alternative options of alternative supply remain to all P&H's former customers, the impact of the collapse on the wholesale market is not sufficient to require the reconsideration of its provisional decision on the merger.

Simon Polito, Chairman, CMA 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 this will continue after Tesco buys Booker."

The UK Competition and Markets Authority (CMA) has published the provisional findings of its stage two, in-depth investigation into the proposed merger between Tesco, the UK's largest grocery retailer, and Booker, the UK's largest grocery wholesaler. In its conclusion the CMA states "We provisionally conclude that the Merger may not be expected to result in a serious lessening of competition within any market or markets for goods or services in the UK".

Final decision to be published by 26 December

Following this provisional decision, third parties will have the opportunity to make representation for the consideration of the CMA before its publishes its final decision before 26 December. The deadline for these representations is 5 December. Following the final CMA decision the last hurdle for the deal will be shareholder approval, which needs to be given by both Tesco and Booker shareholders. Currently Tesco anticipates that the deal will be completed in early 2018.

No conditions identified in findings

Despite press speculation that some remedial action, such as store disposals, may be required by the CMA to progress the deal, the provisional decision has not specified any such conditions. In its report the CMA has concluded that there is no significant potential harm to competition across all five areas of concern tackled in its investigation. If upheld these provisional findings will enable a rapid implementation of the merger.

Tesco has become the first of the Big Four retailers to sign up to the National Farmers' Union's fruit and veg pledge.

Joining the NFU fruit and veg pledge

The NFU's fruit and veg pledge is designed to nurture long-lasting relationships between retailers and suppliers, with commitments to treat suppliers fairly, reduce food waste and buy more British fruit and veg when it's in season. The move offers greater price certainty for growers - for a season or on a specified volume of produce, with no unexpected or imposed changes. It will also help growers plan promotional activity in advance. The move builds on previous support for growers to extend the season for British produce in-store and use crops more fully.

First of the Big Four

By signing up for the pledge, Tesco becomes the first of the Big Four to do so. Retailers to have already signed up to the pledge since its launch in 2012 include Aldi, Lidl and Co-op.

Ensuring fairness for farmers

NFU President Meurig Raymond commented: “It is excellent news that Tesco has signed the NFU’s Fruit and Veg pledge. British farmers produce the food which helps to feed the nation and it is positive to see Tesco recognise that fact, committing to values that ensure fairness for the farmer and the supply chain.

“By offering this vital certainty and commitment, Tesco’s suppliers of fruit and veg will be in a stronger position to invest in their business, plan for the future, boost productivity and compete in a global marketplace. By signing up to the pledge, Tesco is telling suppliers it has started the journey of delivering ever higher standards of business integrity, which we are very proud of.


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