Competition watchdog opens investigation into Tesco's takeover of Booker

The competition watchdog has officially opened an investigation into Tesco’s planned £3.7 billion takeover of wholesaler Booker.

The Competition and Markets Authority said it will decide by July 25 whether the deal “could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker”.

The regulator will then either clear the tie-up or refer it to a more in-depth investigation, known as a phase 2. That could last for up to 24 weeks unless Tesco and Booker come up with concessions to allay competition fears.

The CMA had been widely expected to examine the takeover, which was announced in January, over concerns it will give Tesco too much power, particularly when it comes to the fast-growing convenience sector.

Tesco owns the One Stop chain, while Booker owns Budgens, Londis and Premier and supplies caterers and restaurants.

Tesco and Booker have argued that Booker’s franchise model means the grocer will have no influence over pricing at its stores. They also say Booker’s existing customers will be rewarded by the combined group’s scale in cheaper prices, better service and access to Tesco’s banking operations.

But two of Tesco’s major investors have criticised the deal and board member Richard Cousins left shortly before the deal was announced.

Schroders has expressed scepticism over the price offered for Booker and activist investor Artisan raised concerns about the risk of distraction for a company in the middle of a turnaround.