Is it likely to be approved by the Competition and Markets Authority?
Dominating the business news in recent days has been the proposed £3.7 billion merger between grocery market titan Tesco and wholesale giant Booker Group.One of the questions which people have begun asking of this proposed merger is whether or not it is likely to be approved by the Competition and Markets Authority ("CMA"). The CMA generally becomes involved in proposed transactions which are likely to impact competition within a particular market. For example, the CMA became involved in 2014 with the proposed $69.4 billion merger between Pfizer and AstraZeneca, although ultimately the downfall of this transaction was AstraZeneca’s rejection of the takeover bid in May 2014.
The Competition and Markets Authority ultimately will be able to block the Tesco Booker merger where they have sufficient concern in relation to competition within the particular markets of the two businesses. The key concerns that have been raised in this respect are that although Tesco and Booker operate within two different markets (Supermarket and wholesale markets), there is a significant overlap in relation to competition and an uncomfortable amount of room for abuse. For example, Booker own Budgens, Londis and Premier, all of which operate in direct competition with Tesco stores and One Stop which is owned by Tesco. In addition, a significant part of the Booker Group revolves around wholesale. This includes wholesale to further businesses which may be in competition with Tesco, clearly a concern for those businesses should Tesco later choose to discontinue the wholesale element of Booker or to alter prices or stock.
Statistics
In December 2016 statistics website ‘Statista’ reported Tesco’s share of the UK grocery market as 28.3%. For comparison, the next closest contender is Sainsbury’s who were reported to have a 16.3% market share, closely followed by Asda with 15.3%. Premier, Londis and Budgens unfortunately are not represented specifically in the figure published by Statista but are likely to increase Tesco market share significantly.Tesco’s merger with Booker Group could provide a significant opportunity for diversification for Tesco, clearly a focus of theirs in recent years and evidenced by the advent of Tesco’s banking and telephone operations, their overseas expansion and 2016 purchase of Dobbies Garden Centres. As to whether we are likely to see this new merger proceed, we will simply have to wait and see.
If you would like to know more, please contact me.
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| Oliver Gray - Trainee Solicitor Commercial Department |
Trainee Solicitor - Commercial
Oliver Gray is a Trainee Solicitor
who works in the Commercial
Department dealing with all areas
of commercial work including
contentious and
non contentious work.
He is based at the firms
Marlborough office.
