Return to: Investor | Country
UK equities
27 Jan 2017

Tesco and Booker Group merger

From a Booker Group perspective the announced synergies of at least £200m per annum exceed the entire profits of the company last year, and we are able to participate in the upside from growth in the catering sector.

  541 viewed

Simon Murphy, manager, Old Mutual UK Equity Fund, Old Mutual Global Investors

We are still delving into the details of this transaction, but as shareholders of both Booker Group and Tesco, we are excited about the deal.

From a Booker Group perspective the announced synergies of at least £200m per annum exceed the entire profits of the company last year, and we are able to participate in the upside from growth in the catering sector.

From a Tesco perspective, the addition of 5,800 independent convenience shops creates a network of 8,000 collection points from which consumers can access Tesco banking, mobile and payment services. Tesco also has the potential to access the large eating out market that Booker already operates in. It can do this by using some of its excess space in large stores, combined with Booker’s expertise in delivering produce to pubs, restaurants and other catering customers throughout the country. Financially, the deal improves Tesco’s debt metrics to the extent that the business can restart dividend payments, having already gone some way towards that through its good performance over the last year.

In summary, the combination enables both businesses to improve their offer to their customers in terms of increased choice, better prices and better service. It also works well financially for both sets of shareholders and accelerates growth at both companies.

RELATED ARTICLES
Next article:
Triggering of article 50 - phoney war tactics

20 Mar 2017 | By Richard Buxton

Logic would suggest that the triggering of such a momentous event, and one which everyone knows is coming, should be fully discounted in share prices. The problem for investors is that we are not nece...

Read More
16 Mar 2020 | By Richard Buxton
Market Minutes – coronavirus special: UK equities

From Brexit to the coronavirus pandemic – but what next? Richard Buxton, head of UK equities, and Dan Nickols, head of UK mid- and small-cap, dis...

13 Dec 2019 | By Dan Nickols
The beginning of the end of uncertainty?

The result of the election should help UK small caps, companies exposed to infrastructure spending, and the IPO market.

Loading....%