Britain’s competition regulator has given the green light to supermarket giant Tesco’s £3.7-billion takeover of wholesaler Booker, it said Tuesday.
The takeover, worth $4.8 billion or 4.2 billion euros, has been provisionally cleared by the Competition and Markets Authority (CMA), it announced in a statement.
Tesco launched the blockbuster deal earlier this year in a bid to become the nation’s top food business, slash costs and take on German-owned discount retailers.
The regulator ruled Tuesday that the pair do not compete head-to-head in most of their activities.
“The CMA has provisionally concluded that Tesco’s purchase of Booker does not raise competition concerns,” it said.
The news sent Tesco’s share price surging 6.36 percent to 188.25 pence in afternoon trade on the rising London stock market.
However, shares have still shed around ten percent in value since the deal was unveiled in late January on fears it was overpaying.
“Tesco will be hoping that its sheer size and buying power will help it fend off others in the sector and restore it as the nation’s favourite supermarket,” said analyst Graham Spooner at stockbroker The Share Centre.
“The jury is likely to still be out for some time on that,” he added.
Booker is the country’s largest cash-and-carry operator and sells goods to more than 503,000 customers — including grocers, pubs and restaurants.
It also owns convenience store chains Budgens, Londis and Premier, as well as trade-facing Makro and Booker Wholesale.
“The CMA found that Tesco as a retailer and Booker as a wholesaler, supplying to caterers, independent and symbol group retailers including Premier, Londis and Budgens, do not compete head-to-head in most of their activities,” the regulator added Tuesday.
“In particular, Tesco does not supply the catering sector to which Booker makes over 30 percent of its sales.”
In a brief statement, Tesco welcomed the CMA news, adding that it expected the takeover to complete in early 2018.
“We look forward to creating the UK’s leading food business, bringing together our combined expertise in retail and wholesale,” it said.
“This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers, and colleagues.”
Tesco is Britain’s biggest retailer but has been troubled in recent years by an accounting scandal and fierce domestic competition from German discount chains Aldi and Lidl.
In October however, the supermarket group revealed it had rebounded into first half net profits — and announced it would resume dividend payments to shareholders.
Tesco is the world’s third-biggest supermarket chain after France’s Carrefour and global leader Wal-Mart of the United States.