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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.

Schroders said Tesco should focus on its recovery and withdraw the offer.

Schroders owns a 4.5% stake in Tesco and in the letter it speaks of its support for the supermarket’s focus on improving profit margins and simplifying the business.

“However, there is more to be done to achieve a successful turnaround of Tesco’s business,” Schroders says.

It claims the price that Tesco has offered for Booker “will make the creation of shareholder value extremely challenging”.

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

Deal concerns

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.

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”.

Tesco and Artisan Partners were unavailable for comment.

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