Tesco-Booker deal provisionally cleared

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. In particular, Tesco does not supply the catering sector to which Booker makes more than 30% of its sales.

It comes despite the CMA having earlier raised fears over 350 local areas of overlap between Tesco and Booker where it feared the deal could lead to "worse terms".

Tesco is the UK's largest grocery retailer by some margin while Booker is the largest wholesaler - supplying many of Tesco's competitors.

The Competition and Markets Authority (CMA) said, after conducting an in-depth review, that it had provisionally concluded that Tesco's purchase of Booker does not raise competition concerns.

It had raised worries that there could be a potential for Booker to reduce the wholesale services or terms it offers the stores it now supplies, in order to drive customers to their local Tesco.

The regulator had been investigating whether shoppers and customers would have less choice as a result for merger.

The CMA found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some of its groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies.

The CMA began its investigation in May and launched an in-depth probe in July after Tesco and Booker asked for the inquiry to be fast-tracked.

The CMA will now take more evidence before making a final decision by the end of December.

But he said the focus will now shift on to whether investors will approve the takeover, with 75% of Booker shareholders required to vote in favour.

Even if Tesco wins final approval from the CMA, the supermarket may find it challenging to convince shareholders of the deal.

"Tesco-Booker will be unlikely to be able to expand materially, given its existing store portfolio, but it will drive down margins with its sourcing advantage, and be able to invest in stores with the synergies released from the deal, and create a ubiquitous United Kingdom brand across food wholesale and retail".