Tesco to buy Budgens and Londis owner

As Tesco announces an agreed takeover bid of wholesaler and convenience store owner Booker, Ian Forrest, investment research analyst at The Share Centre, explains what it could mean for investors.

Tesco to buy Budgens and Londis owner

Supermarket giant Tesco has announced an agreed takeover of wholesaler and convenience store owner Booker in a deal which it values at £3.7bn.

For each share in Booker Tesco is offering 0.86 shares in the new combined group and 42.6p in cash. Based on yesterday’s closing share prices the offer is worth 205.3p per share, which is a relatively modest 12% premium.

As an added incentive Tesco said the deal would enable it to restart dividend payments in 2018. Interested investors should note Booker’s chief executive Charles Wilson will join Tesco’s board as part of the deal.

This deal has come out of the blue for shareholders of both entities and has been welcomed by the market with Tesco’s shares up 10% this morning. The appeal for Tesco is clear as it provides access to the growing trend for eating out through Booker’s wholesale business which supplies many small restaurants and catering groups.

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