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Morrison's and McColl's put Tesco under the spotlight with 'win-win' combination

In a £1bn deal, won against five other tenders, Morrison's will supply Safeway products and other national brands to 1,300 McColl's stores and 350 newsagents

picture of Morrison's store
Everyone's a winner

Tesco PLC (LON:TSCO) boss Dave Lewis so far has not wavered in his commitment to acquire cash and carry giant Booker.

The line has consistently been it will enhance Tesco's growth prospects “by creating the UK's leading food business with combined expertise in retail, wholesale, supply chain and digital”.  

Ever since the deal was first announced in January, though, there has been murmuring about the £3.7bn price tag and it if it was a tad rich.

Fund managers Schroder and Artisan, speaking for 9% for the supermarket giant’s shares, have publicly stated their concerns while one director left the Tesco’s board apparently because he disagreed with the acquisition.

Tesco/Booker is currently under the scrutiny of the Competition and Markets Authority, but a little more spice was added to the mix today by grocery rival Morrisons (LON:MRW).

In a £1bn deal, won against five other tenders, it will supply Safeway products and other national brands to 1,300 McColl's (LON:MCLS) convenience shops and its 350 newsagents across the UK.

A new Safeway range of 400 fresh, frozen and ambient food products will be exclusively available to McColl's for a year.

According to the City, it can potentially be a win-win for both companies.

Morrison’s gains a major new customer from which to launch a Safeway brand revival, while McColl’s now has a simplified structure with one major supplier and access to what it described as best-in-class manufacturing and sourcing capabilities.

Reflecting that, McColl’s share price shot ahead by 10% as the City concluded it had played its hand very well, while Morrison’s even added a few pence.

Will Tesco care? Unlikely given Lewis's determination and the fact that Morrison’s deal is nowhere near the scale of Booker.

But it is an awful lot cheaper.  

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