Tesco (LON:TSCO) is still likely to face hurdles in its efforts to acquire Booker Group (LON:BOK), analysts at Hargreaves Lansdown have said. The comments came as the Competition and Markets Authority (LON:CMA) cleared the deal provisionally, angering wholesalers.
Tesco’s share price has been steady in today’s session, having inched 0.16 percent higher to 188.35p as of 09:00 GMT, outperforming the broader UK market, with the benchmark FTSE 100 index having slipped into the red and currently standing 0.41 percent lower at 7,384.30 points. The group’s shares are down by some 13 percent for the past year, as compared with about an 8.7-percent rise in the Footsie.
‘Fly in the ointment’
While the CMA cleared provisionally Tesco’s merger with Booker yesterday, Citywire quoted Hargreaves Lansdown’s analyst Laith Khalaf as saying that the “fly in the ointment could yet be Tesco shareholders, with some influential players still not backing the merger”.
“The problem is there’s a fine line between genius and lunacy, and this deal looks to be walking it,” the analyst pointed out, adding that the concern was that the blue-chip grocer was “trying to run before it can walk, and that a big merger like this could blow its nascent recovery off course”.
The CMA approval meanwhile triggered backlash from Booker competitors, with the competition watchdog having previously been expected to recommend disposals. The Times reported this morning that wholesale and cash and carry groups had condemned the CMA’s report, warning that the deal would ‘destroy competition’ and put thousands of jobs at risk.
Opponents have three weeks to argue their case before a formal decision, which is due by December 26. The newspaper, however, quoted analysts at HSBC as saying that it was unusual for provisional findings to be reversed.