Tesco share price: Activist investor wants better offer for Booker

Equities

Sandell Asset Management plans to oppose supermarket’s takeover bid

A US hedge fund with a stake in Booker Group (LON:BOK) is planning to oppose Tesco’s (LON:TSCO) £3.7-billion takeover bid unless the wholesaler secures a better deal, Reuters has reported. The news comes ahead of a shareholder vote on the tie-up later this month.

Tesco’s share price has advanced in London this morning having added 0.59 percent to 203.60p as of 08:40 GMT, outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.38 percent in the red at 7,143.60 points. Booker’s share price meanwhile is 0.99 percent better off at 223.70p, as compared with a 0.37-percent dip in the mid-cap FTSE 250 index.

Hedge fund to oppose Booker deal

Reuters reported yesterday that Sandell Asset Management had expressed its concerns about the Tesco takeover in a letter to Booker’s board, noting that it believed that the value of the wholesaler’s shares stood between 255p and 265p per share, above the value of the FTSE 100 grocer’s bid when the deal was agreed in January last year. At the time, Tesco’s cash-and-shares offer was worth 205.3p per share.

The criticism comes ahead of a vote by Booker’s shareholders to approve the takeover at a meeting due to be held on February 28, with the wholesaler needing the backing of 75 percent of its shareholders for the deal to proceed. Sandell holds the equivalent of 1.75 percent of the mid-cap company.

‘Poor currency’

Reuters quoted Sandell as pointing out that the premium Tesco offered to Booker, which was 12 percent at the time the deal was announced, was ‘well below the average’ paid to British companies which have been bought in the last decade, which the fund said was about 25 percent. The hedge fund further argued that the blue-chip grocer’s vulnerability to online competitors meant its shares were ‘poor currency’.

The news comes after it emerged this week that Tesco was facing a demand for up to £4 billion in back pay from thousands of mainly female shopworkers.

As of 09:01 GMT, Friday, 09 February, Tesco PLC share price is 204.20p.