Tesco's Booker merger plan facing competition probe
The UK's competition watchdog has launched an investigation into Tesco's £3.7 billion deal to merge with food wholesaler Booker.
The Competition and Markets Authority (CMA) said the initial probe will last until July 25 and will discover whether the tie-up will curb choice for customers.
Britain's biggest supermarket has faced criticism from investors over the move, with some shareholders branding the takeover tilt a "distraction" and urging the Big Four grocer to scrap it.
In a statement, the CMA said it will "assess whether the deal could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker".
The watchdog said the deal may face a further investigation, which could last 24 weeks, if it fails to win clearance during the first phase.
Tesco announced the deal in January, saying it would create "the UK's leading food business" and deliver significant cost savings for the combined group.
However, the move has come under fire from some of the supermarket's shareholders, while analysts believe it will face a lengthy investigation from competition regulators.
Among its recommendations, the CMA could force Tesco to offload stores if it feels the deal will harm competition within the industry.
Tesco chief executive Dave Lewis has brushed aside calls to stop the tie-up in its tracks, reaffirming in March that he was "absolutely completely committed to the deal".
Booker is the country's largest wholesaler and owns Londis and Budgens as franchised outlets.
The firm saw a nnual pre-tax profits jump 15% to £174 million to March 24 this year, with convenience store sales at Budgens and Londis more than doubling to £700 million.
The announcement follows reports on Friday that Sainsbury's is mulling a takeover approach for wholesaler Palmer and Harvey (P&H).
Britain's second biggest supermarket is said to be considering a swoop for P&H after the 90-year-old firm was put up for sale, Sky News said.
P&H has a turnover of more than £4 billion a year and supplies alcohol, groceries and frozen food to 90,000 retail outlets, including Tesco supermarkets.
Jonathan Buxton, head of retail at Cavendish Corporate Finance, said a prospective deal would be a defensive move by Sainsbury's in the face of the Tesco-Booker deal.
The CMA is inviting interested parties to submit their views on the Tesco-Booker deal by June 13.