The new business will offer Tesco an opportunity to develop its own-label and fresh ranges, it said. Food waste would be cut, and farmers’ efficiency would be improved after creating a “multi-channel partner” to work with producers.
The merged business would benefit suppliers, consumers, small businesses and caterers, Tesco said. Tesco would enhance its growth prospects from the deal, said Tesco ceo Dave Lewis.
‘Leading food 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 and digital,” said Lewis.
“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.”
Booker shareholders will receive 0.861 new Tesco shares after the surprise mega-merger, and 42.6p in cash. They would own about 16% of the combined business after the merger.
‘Improving choice, prices and service’
Booker ceo Charles Wilson said: “Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve.
“We believe that joining forces with Tesco offers the potential to bring major benefits to end consumers, our customers, suppliers, colleagues and shareholders.”
The deal was also expected to offer customers better quality food at “attractive” prices, Tesco said. Other benefits included growing the ‘out of home’ food market, improved choice, price and service for independent retailers and caterers, and creating more innovation opportunities for customers.
City analyst Shore Capital’s Clive Black said: “The Boards of Tesco, the UK’s largest supermarket group and the country’s biggest retailer, and Booker, the UK’s number one wholesaler, with a strong position supplying the retail trade and small businesses, plus a growing presence in the foodservice segment, has revealed one of the corporate surprises of the retail century so far!
“In these leaky times, well done to both sets of management and their advisors in keeping this under wraps!”
Meanwhile, Tesco reported a 1.1% rise in total sales on January 13, across the 19 weeks to January 7. That included a 1.3% rise in like-for-like food sales over the Christmas period.