Tesco and Booker shareholders give marriage blessing

By James Davey and Alistair Smout

LONDON (Reuters) - Tesco's 4 billion pound ($5.5 billion) takeover of Booker was overwhelmingly backed by shareholders of both companies on Wednesday, clearing the final hurdles to the creation of a new powerhouse in Britain's 200 billion pounds-a-year food market.

Investor approval, which followed the regulatory green light in December, means the cash and shares deal to combine Tesco, Britain's biggest retailer, with Booker, the country's largest wholesaler, is set to complete on March 5.

The support is a personal victory for Tesco Chief Executive Dave Lewis, who stunned the market in January 2017 with an agreed deal with Booker that was originally valued at 3.7 billion pounds.

He won the argument despite dissent from some Tesco and Booker investors and from his own board, with critics on both sides unhappy over the price being paid and the potential for the tie-up to disrupt operations. The late Richard Cousins resigned in protest as senior independent director at Tesco in January last year.

The takeover is the boldest move yet by Lewis, who took over in 2014 shortly before an accounting scandal plunged Tesco into the worst crisis in its near 100-year history.

At a general meeting of Tesco investors, 85 percent of votes cast approved the deal. At two Booker shareholder meetings - a scheme court meeting and a general meeting - 84 and 83 percent respectively of votes cast backed the takeover, easily passing the required 75 percent threshold.

'UNLOCK GROWTH'

"The successful approval of the Booker deal levels one of the main pillars of uncertainty surrounding the Tesco investment case," said Freddie Lait, chief investment officer and founder of Latitude Investment Management, a Tesco investor.

Shares in Tesco closed up 1.8 percent, while Booker was up 1.6 percent.

"By coming together Tesco and Booker will be able to unlock growth in the food industry in a way that neither could do so easily alone," Tesco Chairman John Allan said at the retailer's meeting in central London, attended by just 65 shareholders, with most votes cast by proxy.

Already the dominant player with a 28 percent share of Britain's retail grocery market, the takeover provides Tesco with greater access to the "away from home" part of the food sector - something that angered competitors who failed in their attempts to convince regulators to block the deal.

That market is worth 85 billion pounds and growing at over 3 percent a year.

Tesco also expects the deal to provide pretax synergies of 200 million pounds per annum after three years.

Booker serves 450,000 caterers and small businesses, and counts chains Carluccios, Wagamama and celebrity chef Rick Stein as clients. It also owns about 200 cash and carry warehouses and supplies 120,000 retailers, including the Budgens, Londis, Premier and Family Shopper chains, which are run as franchise operations.

'JOINING FORCES'

The combined business will on Monday kick off a plan that Allan said was called "Joining Forces".

An initial 90-day programme would carefully bring Tesco and Booker together. "They are both performing very well at the moment, we don't want to do anything that will actually take the wheels off either business," he said.

Allan also reassured investors the deal was not the start of a buying spree. "It's an important move which we will get the best out of over the next few years before we think of moving on to anything else," he said.

Tesco's move on Booker has, however, sparked more consolidation in the UK grocery market as supermarkets seek additional sources of growth and uses for excess capacity in their supply chains.

Last year the Co-operative Group bought the Nisa convenience chain, while Morrisons sealed a wholesale supply deal with the McColl's chain.

($1 = 0.7240 pounds)

(Additional reporting by Simon Jessop Editing by Keith Weir and Mark Potter)