Tesco’s plans to merge with wholesalers Booker has been given the green light by the Competition and Markets Authority in a move due to add to the fears some analysts have for the firm.
Despite positive results in October, some investors warned that the supermarket giant was not in strong enough shape to execute the merger at present.
Hargreaves Lansdown senior analyst Laith Khalaf called the deal “a potential banana skin for management.”
“The risk is that just as the good ship Tesco is steadying, it gets blown off course by the Booker deal,” he said. “This is also not a takeover that is unanimously backed by shareholders, with a few big investors voicing their opposition to the transaction.”
Tesco shares were up 4.5 per cent by 8.30am on the back of the CMA’s ruling.
The CMA gave provisional clearance to the deal, finding that head-to-head competition in areas such as supplying the catering sector was currently limited.
The watchdog also ruled that the move was unlikely to increase prices or reduce services in locations with both a Tesco and a Booker-supplied supermarket due to the strong competition that exists in both the grocery wholesale and retail markets.