* Bid target Booker says sales growth slowed
* Booker CEO says excited about Tesco deal
* Deal faces regulatory scrutiny
(Adds detail, background, shares)
LONDON, March 30 Booker, the British
wholesaler that has agreed to a 3.7 billion pound ($4.6 billion)
takeover by Tesco, said quarterly sales growth had
slowed, with tobacco sales hurt by a shop display ban and plain
Chief Executive Charles Wilson said he remained enthusiastic
about the prospect of merging with Tesco, Britain's biggest
retailer, as agreed in January despite investor concerns.
Tesco's third and fourth largest investors, Schroders
and Artisan Partners, this week called on the
supermarket group to withdraw its offer, saying it was
overpaying and the deal was a distraction to its turnaround
"We are excited about the benefits the enlarged group will
bring to consumers, our customers, suppliers, colleagues and
shareholders," said Wilson, noting the deal was currently going
through the competition process. Wilson will become a Tesco
director once the deal goes through.
Booker, which supplies the Budgens, Londis, Happy Shopper
and Premier convenience chains and also operates cash and carry
business Makro, said group sales rose 0.5 percent in the 12
weeks to March 24, while like-for-like sales were up 0.7 percent
in the period, the last quarter of its financial year.
That is a marked slowdown from like-for-like sales growth of
3.2 percent in the previous three months. Tobacco sales were
down 7.5 percent in the latest period.
Shares in Booker, up 13.4 percent so far this year, were up
0.2 percent at 199.5p at 0845 GMT. The Tesco cash and share
offer values the stock at around 207p, based on current prices.
DEAL IN FOCUS
Analysts pointed out that while tobacco is a high turnover
business for Booker it has little impact on profit.
"We continue to expect the Tesco deal to complete despite
concerns expressed by two of the leading shareholders," said
Peel Hunt analyst Charles Hunt, who has a "Buy" rating on the
"These numbers should reassure that Booker provides stronger
growth than the food retailers as well as access to the
foodservice market for Tesco," he added.
Prior to the update, analysts' average forecast was for a
pretax profit of 171.3 million pounds for the 2016-17 year, up
from 150.8 million pounds in 2015-16, according to Reuters data.
Total sales for the year were 5.3 billion pounds, up 6.7
Tesco, responding to the dissenting shareholders, has said
it was "completely committed" to the deal.
Tesco is looking to increase its exposure to Britain's 85
billion pound "out of home" food market, including cafes,
restaurants and takeaways, which is growing at a greater pace
than the 110 billion pound "eat at home" market.
Though Tesco and Booker maintain they have a compelling
competition case the deal is expected to face intense scrutiny
from Britain's competition authorities as it will increase
Tesco's influence on the overall UK grocery market where it
already has a 28 percent share.
Although both companies are currently engaging with
Britain's Competition and Markets Authority (CMA), it is yet to
formally confirm the start of a Phase 1 investigation.
($1 = 0.8044 pounds)
(Reporting by James Davey; Editing by David Evans/Keith Weir)