Will supermarket giant Tesco offload hundreds of smaller stores in order to gain approval for Booker takeover bid?
Tesco could be forced sell off hundreds of its Express stores in order to ease competition concerns ahead of its proposed deal with foodservice wholesaler Booker.
The supermarket giant is in talks over a £3.7 billion takeover, but rivals and the competition watchdog have raised concerns that it could give Tesco too much influence in the UK grocery sector.
In order to ease these worries and secure competition approval, it could offload vast swathes of its smaller high street stores.
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Why the onus falls on Tesco
Booker is the UK’s largest food wholesale operator and owns a range of convenience chains, including Budgens and Londis.
The proposed deal would turn Tesco into a major supplier to small retailers, which has reportedly raised competition concerns.
Crucially, Booker operates a franchise model for its convenience chains, meaning it doesn’t technically own any of the stores.
That means it falls on Tesco to reduce the number of Express shops it operates.
While the exact number of stores it could offload is unclear, sources have described it as running into the hundreds.
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Lack of shareholder support
Competition concerns aren’t the only potential stumbling block for the Booker deal, as Tesco faces opposition from many of its shareholders.
Nick Kirrage, a fund manager at asset manager Schroders, which holds a 4.5% stake in the supermarket giant, told the BBC he had “major concerns” about the deal and suggested Tesco was paying too much for Booker.
Similarly, Daniel O'Keefe of Artisan Partners described the deal as a distraction for Tesco's management and a risk not worth taking.
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