Tesco announce takeover of wholesale giants Booker
Secret deal leaves several hedge funds counting the cost of shorting Tesco's shares
by Abi Moses on 30th January, 2017 and updated 10th February, 2017 10:27am
Tesco have announced a sensational takeover deal of wholesaler Booker, making them what has been described as "the UK's leading food business.
Incredibly the takeover of the FTSE 250 operator, thought to have taken up to six months to get over the line had been kept a secret right up until the announcement. The secrecy of the deal means investors have been caught cold by the news. Several hedge funds had allegedly been shorting Tesco's stock in recent weeks, believing they were still a long way from fixing the problems caused by their accounting scandal.
When the Booker deal was announced, Tesco shares saw a 10% rise, causing big losses to those hedge funds. The likes of Marshall Wace, Delores Holdings, Pelham Long / Short Master Fund are thought to be amongst those affected.
Although there has been a surge in the Tesco share price, not everybody has welcomed the news. The chief executive of the Association of Convenience Stores , James Lowman, believes that some shops "might not like the idea of working in partnership with Tesco."
Tesco's recent, rapid expansion in the convenience store sector has directly contributed to the closure of many independent retailers, with many now fearing their latest takeover will see them monopolise the market as both a retailer and distributor.
Tesco chief executive Dave Lewis has moved to play down such concerns, labelling the takeover as a "low-risk merger". Mr Lewis claims there will be no more stores opening as the Londis, Budgens and Premier Foods stores; all currently owned by Booker, are all franchised businesses.
Mr Lewis has also refuted claims that these stores and their franchisees would begin to stock Tesco's own products. He claims there is "no intention of taking Tesco brands into stores we do not own, this is not about job cuts."
How do you think the takeover will affect the retail sector?
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