Tesco’s £3.7 billion deal to buy wholesale group Booker has been provisionally cleared by the Competition and Markets Authority (CMA).
Rivals raised competition concerns about the deal, but the watchdog said the supermarket giant and Booker do not compete “head-to-head” in most areas.
The CMA had previously raised fears over 350 local areas of overlap between Tesco and Booker and said it was worried shoppers could face worse terms when buying their groceries as a result of the deal.
But, in justifying its decision, the CMA said: “Tesco does not supply the catering sector to which Booker makes over 30% of its sales.”
Shares in Tesco and Booker rose following the announcement.
Booker is the country’s largest wholesaler and owns Londis and Budgens as franchised outlets.
Rivals are concerned the deal could see Booker benefit from improved supplier terms, making it difficult for them to compete. The CMA said rival wholesales argued Booker could raise prices to the shops it supplies.
But on announcing its provisional findings, the CMA said Booker would be able to negotiate better terms from its suppliers for some of its groceries, and that it was likely to pass on these savings to the shops it supplies.
Simon Polito, chair of the CMA’s inquiry group, said: “Our investigation has found that existing competition is sufficiently strong in both the wholesale and retail grocery sectors to ensure that the merger between Tesco and Booker will not lead to higher prices or a reduced service for supermarket and convenience shoppers.”
The CMA said Booker’s share of the UK grocery wholesaling market – less than 20% – was not large enough to spark longer-term concerns.
The watchdog 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. It is due to report its final findings in December.
Tesco welcomed the announcement and said it expected the merger to be complete in early 2018.
“This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers and colleagues,” a Tesco spokesperson said.
Booker said: “We are pleased that the CMA has provisionally concluded that this transaction does not lessen competition, and will continue to work with the CMA ahead of its publication of a final decision, expected in December.”