Shareholders of U.K. food wholesaler Booker Group PLC on Feb. 28 endorsed a £4 billion sale of the company to supermarket operator Tesco PLC, ignoring pleas from some investors and shareholder advisory groups that had advocated holding out for a better deal.
According to preliminary tallies in two votes on the transaction, Booker said in a statement posted on its website that shareholders representing about 83% of the votes cast in each ballot had approved the sale of the company. Tesco shareholders had endorsed the deal in a separate vote earlier on Feb. 28.
In a statement, Tesco CEO Dave Lewis said he was delighted that shareholders of both companies had given their backing. "This merger is about growth, bringing together our complementary retail and wholesale skills to create the U.K.'s leading food business," he said. "This opens up new opportunities to provide food wherever it is prepared or eaten — 'in home' or 'out of home' — and will benefit our customers, suppliers, colleagues and shareholders."
The vote is the culmination of a drawn-out process since the deal was unveiled by the companies Jan. 27, 2017. The agreement was subjected to the highest level of scrutiny from the U.K. antitrust regulator, the Competition and Markets Authority, which on Dec. 20, 2017, gave the two companies the green light to proceed after it decided that the merger was unlikely to reduce competition in the wholesale and retail channels.
In recent weeks, some Booker shareholders agitated for better terms. Sandell Asset Management Corp., which owns a 1.75% share in Booker, argued in a statement released Feb. 9 that Tesco's offer was insufficient and that shareholders should not support the deal unless the supermarket operator raised its bid.
Under the terms of the deal, Tesco agreed to pay 0.861 of its shares plus 42.6 pence in cash for each Booker share, equivalent to 205.3 pence, valuing the deal at £3.7 billion. Due to an increase in Tesco's share price since the deal was announced, the valuation has risen to about 225 pence a share, or about £4 billion.
Sandell, in its statement, reckoned that fair value for Booker was in the range of 255 pence to 265 pence a share. Its cause reportedly was echoed by shareholder advisory services Institutional Shareholder Services and Glass Lewis, which urged shareholders to reject the deal.
The combination of Tesco and Booker will create a food business with extensive product development and procurement expertise as well as market reach across stores, cash and carry, home and business delivery, and click and collect services.
Tesco, the U.K.'s largest supermarket operator by revenue and number of stores, carries out 50 million customer transactions per week and has 16 million members in its customer loyalty program. Booker, which operates from 200 outlets with a fleet of 1,200 vehicles, serves 700,000 small businesses, 450,000 caterers and 120,000 retailers.
According to figures provided when the companies unveiled the deal, the combined entity would have posted pro forma 2015-2016 sales of £59.4 billion and generated EBITDA of £2.4 billion.
