Tesco and Booker: obvious in hindsight?

Antony Begley

Friday 27 January was set to be a quiet day at the office in SLR Towers. Tie up a few loose ends and plough on with the March issue. Then Tesco and Booker made a small announcement to the Stock Exchange about the biggest deal the industry has ever seen. And that’s no under-statement. Friday went out of the window. SLR had already gone to press but we halted that to allow us to carry this landscape-altering news and attempt to quickly digest the fact that a merged Tesco-Booker business will control a truly enormous portion of the UK’s food sales market.

In many ways, the deal is classic Charles Wilson. A deal that initially looked entirely leftfield but suddenly seems obvious once you have had the chance to think about it. Not a million miles from the general reaction to Booker’s acquisition of Makro, for instance.

For all the hysteria that surrounded the announcement, the deal makes a lot of sense to both parties. It’s estimated that Tesco will add an additional £200m a year to its bottom line over the next three years, give or take a fiver. For Booker, the deal gives its Premier, Londis, Musgrave and cash and carry customers access to buying power and a supply chain unmatched in the UK.

Booker’s increasing stranglehold at the symbol group end of the UK local retailing trade only looks to be heading in one direction. Not bad for a business that was quite literally on the verge of going bust when Wilson took over as Chief Executive just a dozen years ago.

Whether the deal will be referred to the markets watchdog is an interesting question. There would be little chance of Tesco being allowed to buy a controlling share in a business that owned almost 5,500 independent stores. But as we all know, Booker doesn’t own them – every single one is owned by an independent retailer. So where does that leave us? Only time will tell.

In the meantime, Wilson has assured his Booker colleagues that he’ll be there for at least the next five years – and many observers, including the Financial Times, are already touting him as the next CEO of Tesco.

On a less serious front, there is also the burning side-issue of how the SGF will explain having a Tesco man as President for the first time in its 99 year history. (With apologies to Dennis, a man who can take a joke.)

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Antony Begley, Publishing Director