Costcutter latest to make consolidation deal as Tesco and Booker defend merger

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Costcutter

The chief executives of Tesco and Booker have issued a strong defence of their proposed £3.7 billion merger, as Costcutter joins the growing list of convenience grocers making major moves in response.

Concerns have been raised by huge portions of both the grocery and convenience sector ever since the proposed Tesco-Booker deal was announced, but Tesco boss Dave Lewis and Booker’s Charles Wilson yesterday penned a joint letter to the Competition and Markets Authority (CMA) in an attempt to quell fears and streamline the process.

The letter was aimed at tackling the CMA’s accusations that the newly formed partners could divert sales away from Booker’s network of convenience stores in an attempt to drive customers to Tesco.

“We have absolutely no intention to do this,” Lewis and Wilson wrote.

“The operational, financial and reputational risks from such a strategy makes no commercial or operational sense.

“The markets we operate in are too competitive, transparent and dynamic even to contemplate such a possibility.

“We would be punished by our customers and they would simply switch to one of our many respective competitors.”

READ MORE: Sainsbury’s £130m takeover of Nisa grinds to a halt

The news comes as the chief executive of Costcutter, the UK’s second largest convenience store chain, stated in a letter to employees that the retailer could announce a deal shortly.

However, Michael Bibby did make it clear whether Costcutter could be bought by a larger rival, or if would acquire another company.

This move is in direct response to Tesco’s merger plans, with Bibby writing: “When Tesco announced its acquisition of Booker back in January, it took the entire market by surprise.

“Since then, businesses across the grocery and convenience sectors have been open to having discussions that would not have seemed imaginable just one year ago.

“There are exciting opportunities on the table right now… I hope and expect to be able to make a formal announcement soon.”

Costcutter will join other major players in the grocery and convenience sectors looking to defend itself from the proposed Tesco-Booker merger, including Sainsbury’s, which recently paused talks for a proposed takeover of Nisa until the CMA give their verdict on the Tesco-Booker deal.

Morrisons also recently penned a “groundbreaking” deal with McColl’s to solidify its wholesale business, while B&M has bought Heron Foods in a move aimed at breaking into the convenience market.

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