Tesco shareholder opposes £3.7bn Booker takeover

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One of Tesco’s biggest shareholders is urging the supermarket to drop a £3.7bn takeover of food wholesaler Booker amid claims it is paying too much.

In a letter to Tesco’s chairman John Allan, Schroders said the “high price” being paid for Booker would destroy value for investors.

The deal brings together the UK’s largest supermarket and the biggest cash-and carry business.

Tesco said it still believed the deal was “compelling”.

‘Extremely challenging’

Schroders, which owns a 4.5% stake in Tesco, said in the letter that Tesco should focus on its recovery and withdraw the offer.

“There is more to be done to achieve a successful turnaround of Tesco’s business,” Schroders said.

It claimed the price that Tesco had offered for Booker would “make the creation of shareholder value extremely challenging”.

Since becoming chief executive in 2014, Dave Lewis has worked on turning around the crisis-hit supermarket which reported a £6.4bn loss in 2015 – the worst in its history.

It is still under investigation by the Serious Fraud Office for overstating its accounts under the old management.

‘Merits of the deal’

The supermarket said in a statement that it believed the deal would improve its recovery plans.

“We have been working on the transaction for over 12 months and believe the strategic and financial rationale is compelling,” a spokesperson said.

The deal would drive growth for the two firms and help Tesco to source, distribute and sell food in the UK market, they said.

“Since announcing the transaction the majority of our top 10 shareholders have chosen to increase their shareholding in Tesco and we hope to convince all our shareholders of the merits of the transaction.”

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Budgens is one of the brands owned by Booker

Another major Tesco shareholder, Artisan Partners, which also owns a 4.5% stake, has questioned the deal as well, according to reports.

Tesco surprised investors in January when it announced the £3.7bn takeover of Booker. As well as its wholesale business, Booker also owns the Premier, Budgens and Londis convenience-store brands.

The acquisition has already cost Tesco its senior independent director, Richard Cousins, who left because he disagreed with the takeover.

Schroders praised Mr Cousins, who is chief executive at catering giant Compass, for his “demonstration of integrity” which it said “delivers a powerful message about his concerns around the merits of the deal”.

It said it would encourage other non-executive directors at Tesco to follow his lead. Schroders also called for other shareholders who “share our views to voice them”.

Artisan Partners was unavailable for comment.

Tesco shareholder opposes £3.7bn Booker takeover

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