WELWYN GARDEN CITY, UK - One of Britain’s largest retailers, Tesco, surprised many industry insiders this week with a £3.7 billion ($4.6 billion USD) buyout of food supplier Booker.
"It's the next evolution of our strategy... We think it's the right time," Tesco CEO Dave Lewis told Reuters. "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 chain, and digital."
According to Reuters, the planned cash and shares takeover exhibits a renewed confidence, displayed by Tesco after two years of gradual recovery from an accounting scandal and loss of market share to discount rivals.
The pivot into foodservice also marks a change of gears and perhaps signals an increased focus on the company’s British business. Since Lewis assumed control of the company in September of 2014, Tesco has been steadily streamlining its operations, cutting costs and selling assets—including its $6.1 billion operation in South Korea.
The deal will give Tesco a greater share of Britain’s “out of home” food market—including cafes, restaurants, and “takeaways.” Tesco will gain exposure to 120,000 independent retailers, 107,000 small businesses, and 450,000 caterers that Booker serves, along with 200 cash and carry warehouses supplying franchise partners from the Budgens, Londis, and Family Shopper grocery chains.
Tesco and Booker’s representatives told Reuters that the buyout would lead to synergies of at least £200 million (approximately $251 million), and implementation is expected to cost £145 million (nearly $182 million).
According to the news source, the acquisition, expected to be completed in late-2017 or early-2018, could draw scrutiny from regulators. AndNowUKnow will keep you updated as the situation progresses.
