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Fri 27th Jan 2017 - Tesco and Booker unveil merger plan
Tesco and Booker unveil merger plan: The boards of Tesco and Booker Group have reached an agreement on the terms of a recommended share and cash merger that values Booker at £3.7bn. A stock market statement said: “The combined group will bring benefits for consumers, independent retailers, caterers, small businesses, suppliers, and colleagues, as well as delivering significant value to shareholders. The combined group will be well placed to serve the large, established ‘in home’ food market as well as the faster growing ‘out of home’ food market. By bringing together Tesco and Booker’s retail and wholesale expertise, supply chain and digital capabilities, the combined group will be able to provide greater choice, quality, price and service in the food market, whilst improving efficiency and reducing food waste. The combined group will bring together the capacity and capability to generate new growth and deliver significant revenue and cost synergies.” Dave Lewis, chief executive of Tesco, said: “Tesco has made significant progress in turning around our UK retail business. This merger with Booker will further enhance Tesco’s growth prospects by creating the UK’s leading food business with combined expertise in retail, wholesale, supply chain and digital. Wherever food is prepared and eaten – ‘in home’ or ‘out of home’ – we will meet this opportunity with the widest choice and best service available.” Charles Wilson, chief executive of Booker, said: “Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve. We believe that joining forces with Tesco offers the potential to bring major benefits to end consumers, our customers, suppliers, colleagues and shareholders.” Under the terms of the merger, each Booker Shareholder will receive for each Booker share, 0.861 of new Tesco shares and 42.6 pence in cash. Based on the closing price of 189.0 pence per Tesco Share on 26 January 2017 (being the last Business Day before the date of this Announcement), the terms of the merger represent: a value of approximately 205.3 pence per Booker share and a value of approximately £3.7 billion for Booker’s ordinary share capital. The deal represents a premium of approximately 12% to the closing price of 183.1 pence per Booker Share on 26 January 2017. The merger will result in Booker shareholders owning approximately 16% of the combined group. Opportunities for revenue and cost synergies have been identified which support the significant shareholder value creation opportunity of the merger. The Tesco board expect pre-tax synergies for the combined group to reach a run-rate of at least £200 million per annum by the end of the third year following completion of the merger. Quantified revenue synergies of at least £25 million per annum are anticipated to come by the end of the third year following completion of the merger, primarily from an enhanced offering and customer proposition. The Tesco board also believes that there is significant opportunity for further revenue synergies which have not been fully quantified for reporting under the Code at this stage. The merger is also expected to enable opportunity for cost synergies of at least £175 million, mainly in areas such as procurement and distribution. On completion of the merger, Charles Wilson and Stewart Gilliland, Booker’s chairman, will join the combined group’s board. Charles Wilson will also join the combined group’s executive committee.

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