Tesco PLC (LON:TSCO) saw its shares slip slightly today as the group confirmed that the Competition and Markets Authority (CMA) has started a “standard phase 1 review” of the retail giant’s proposed takeover of wholesaler Booker Group PLC (LON:BOK), while reports also suggested its boss could become a witness for the prosecution in the fraud case around its accounting scandal.
In a brief statement, the FTSE 100-listed firm said the phase 1 review was triggered today after it filed a formal notification with the CMA in respect of the proposed merger.
READ: Tesco pops Booker in the shopping trolley
Tesco said this notification followed “constructive engagement“ with the CMA since the merger was first announced on 27 January 2017.
In late afternoon trading, Tesco shares were 0.7%, or 1.35p lower at 185.45p, off erarlier lows.
In a statement on its website, the CMA said the first phase of the investigation, which runs until 25 July 2017, will “assess whether the deal could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker.”
After this first phase, the CMA added, the merger will either be cleared or, if a potential reduction in competition is identified, it will be referred for an in-depth investigation lasting up to 24 weeks - unless the merging parties can offer proposals following the first phase of the investigation which address any concerns identified.
The supermarkets group is offering 0.861 Tesco shares plus 42.6p in cash for each Booker share, valuing the FTSE 250-listed firm at around £3.7bn and each share at around 205.3p.
Booker shareholders will also get to keep various planned dividend payments, adding around 8p a share to the value of the offer.
Tesco has said pre-tax synergies for the combined group are expected to reach a run-rate of at least £200 million a year by the end of the third year following completion of the merger of its supermarkets and Booker's businesses, which include the Budgens and Londis convenience store brands.
Lewis lined up as witness for the prosecution
Elsewhere, a report in The Guardian newspaper today said Tesco chief executive, Dave Lewis, could appear as a witness for the prosecution in a fraud case involving three of the supermarket’s former directors.
The allegations relate to the October 2014 accounting scandal at the supermarkets giant which saw the company admit it had overstated profits by £263mln by incorrectly booking payments from suppliers, a figure later increased to as much as £326mln.
Lewis is among 10 witnesses lined up by the prosecution, it emerged at a pre-trial hearing on Tuesday, the newspaper said.