Tesco and Booker shareholders will vote on Wednesday on whether to approve the merger of the two companies.
The offer represents 0.861 new Tesco shares for each Booker share, plus 42.6p a share in cash. This represented a 12% premium to the Booker share price of 183.1p on the day before the deal was announced, when Tesco shares stood at 189p. Since then, however, the Booker share price has risen to over 224p and the Tesco share price to over 206p, meaning that there is no longer such a significant premium to the Booker share price. It also increases the value of the deal from £3.7bn to £3.9bn.
The two groups’ shareholders will hold separate meetings to vote on the deal, which aims to deliver synergies of £200m within three years and would directly affect deliveries to Premier, Londis, Budgens and Family Shopper retailers across the country.
Booker shareholders have offered mixed messages, with top 20 shareholders Invesco Perpetual and Investec Asset Management reportedly stating they will vote in favour of the merger, according to The Times. However, shareholders Sandell Asset Management and Alpine Associates Management are pushing for a higher offer.
Advisory firms are similarly split, with Pensions Investments and Research Consultants (Pirc) recommending both sets of shareholders back the deal, according to The Times.
But advisors Glass Lewis and Institutional Shareholder Services (ISS) have recommended Booker investors oppose the 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 said in a note.
“In addition, the rationale for Booker shareholders to give up control appears less than compelling at the relatively low premium offered.”
The proposed merger received unconditional approval from the Competition and Markets Authority in December.
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