Tesco (LON:TSCO) and takeover target Booker have defended their proposed merger to the Competition and Markets Authority (CMA). The move comes with the tie-up currently undergoing a more detailed Phase-II competition investigation.
Tesco’s share price closed little changed in London yesterday, adding 0.19 percent to 187.45p, as compared with a 0.33-percent rise in the benchmark FTSE 100 index. The group’s shares have added more than 17 percent to their value over the past year, but have given up just under 10 percent in the year-to-date.
The CMA revealed yesterday that Tesco and Booker had submitted a statement to the merger enquiry group earlier this month, noting that they operated in distinct market sectors, namely wholesale and retail, and did not compete with each other.
“It has been suggested that the merged business might try to ‘divert’ sales from one part of the business to another, by artificially ‘deteriorating’ the offer in either Tesco stores or to Booker retail customers,” the companies pointed out, adding that they had ‘absolutely no intention to do this’.
The statement came as the CMA launched a detailed Phase-II enquiry into the merger earlier this year, amid concerns over its impact on the convenience sector. The watchdog had previously said that it believed that in more than 350 local areas with an overlap between Tesco shops and Booker-supplied ‘symbol’ stores, shoppers could face worse terms when buying their groceries. The watchdog’s final report on the merger is due out before Christmas.
The CMA is separately looking into Tesco’s sale of its opticians business in the UK and the Republic of Ireland to Vision Express. It has set a deadline of September 28 for its decision whether to refer the tie-up to a phase-II enquiry.