Major Tesco shareholder questions Booker deal

charles wilson
Former Booker chief executive Charles Wilson

One of Tesco’s biggest shareholders has warned that he has “major concerns” about the supermarket’s £3.7bn bid for Booker.

Schroders fund manager Nick Kirrage told the BBC’s Today programme that the supermarket was paying a “premium” for the wholesale giant. Schroders owns a 4.5% stake in Tesco.

Tesco chief Dave Lewis has stated that the company is “completely committed” to the Booker deal, which was announced in January.

Kirrage told the Today show: “Booker is a business that has been doing extremely well, its profits have been growing very quickly and profit margins have been expanding rapidly. Tesco have had to pay a premium and have made an assumption that profits are going to continue to grow in the future.

“History suggests that the vast bulk of acquisitions destroy value for the acquiring shareholders in instances where you buy a high multiple. Even fewer deals create value and so we objectively think, looking back at history, that this is a deal that is going to struggle to create value. We have major concerns about it.”

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

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

Tesco 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.

“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.”

The unwanted speculation around the deal comes as Tesco agreed to pay a fine of £129m to avoid prosecution for overstating its profits in 2014.


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