Tesco's £3.7bn Booker takeover deal backed by watchdog

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"Strong competition in the market ensures that shoppers can choose the best deal for them", said Simon Polito, chair of the inquiry group.

The CMA had previously raised fears over 350 local areas of overlap between Tesco and Booker and said it was anxious shoppers could face worse terms when buying their groceries as a result of the deal.

Shares in Tesco and Booker rose following the announcement. "That worry is compounded by a tough consumer environment, changing shopping habits and fierce levels of industry competition".

The Competition and Markets Authority has provisionally cleared Tesco's £3.7 billion merger with the cash-and-carry group Booker.

While 50% of Tesco investors must give the deal the green light, the threshold is 75% for Booker shareholders.

A raft of rival wholesalers have also raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete, according to the CMA. The CMA consequently began a fast-track probe into the deal in July. They argued that as a result, in the longer term, Booker might be able to raise prices to the shops that it supplies.

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Tesco won provisional approval for its proposed £3.7 billion ($4.9 billion) takeover of wholesaler Booker from the United Kingdom competition regulator on Tuesday, moving Britain's biggest retailer closer to securing a new avenue of growth.

The watchdog also ruled that the move was unlikely to increase prices or reduce services in locations with both a Tesco and a Booker-supplied supermarket due to the strong competition that exists in both the grocery wholesale and retail markets.

The CMA provisionally concluded that the level of competition in the grocery wholesale and retail markets would be sufficient.

The CMA opened its phase 1 investigation into the merger in May.

Tesco aims to work more closely with its suppliers to strengthen its own-brand and fresh food ranges.

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