Executive Summary

• Tesco, the UK’s biggest grocery retailer, and Booker, the UK’s largest cash-and-carry wholesale supplier, have announced an agreement to merge. The transaction values Booker, the smaller of the parties, at £3.7 billion.
• Tesco and Booker are complementary businesses. While Booker has retail interests through convenience stores, these are non-owned symbol groups, to which it wholesales. The transaction offers Tesco exposure to the foodservice sector, which is growing faster than traditional grocery retailing.
• Pro forma, the group generated some £59 billion in revenue in FY16, with Booker contributing 9% of this. Tesco says that it expects total quantifiable synergies of at least £200 million within three years.