Tesco-Booker merger in danger as shareholders urged to vote against deal

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Booker

Booker shareholders have been urged by a major advisory group to vote against the £3.7 billion tie-up with Tesco, while pressing for a higher offering price.

Institutional Shareholder Services (ISS) has called on investors in the grocery wholesaler to oppose the deal, stating the current terms were “less than compelling” and that Tesco seemed to be getting a better deal.

“Although the combination is expected to result in substantial synergies, it appears that Booker shareholders will have limited potential benefit from those synergies,” ISS stated.

“In addition, the rationale for Booker shareholders to give up control appears less than compelling at the relatively low premium offered.

“The current mechanism to pay only 65pc of full-year 2018 earnings as a closing dividend appears unjustified, given that the expected closing date of the deal coincides closely with Booker’s fiscal year end, and that, in anticipation of the Tesco transaction, Booker paid out to shareholders all its earnings for the previous fiscal year.”

The criticism from ISS follows similar calls from Sandell Asset Management, which owns a 1.75 per cent stake in Booker.

It recently stated that the supplier should be worth between 255p and 265p per share, well above the 205.3p per share Tesco is offering.

In order for the deal to move forward three quarters of Booker shareholders must support it, with the vote due on February 28.

These calls are likely to put the deal under even more intense scrutiny, following an investigation by the Competition and Markets Authority which ended in the deal being approved late last year.

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