Tesco boss Dave Lewis 'completely committed' to Booker deal despite shareholder rebellion

Major investors Schroders and Artisan Partners, who hold a combined 9% of Tesco shares, have spoken out against the £3.7bn deal, claiming it would be an unwanted distraction for the supermarket giant as it continues its turnaround efforts under boss Dave Lewis.

The shareholders have written separately to chairman John Allan urging him to can the planned merger because the price being paid for Booker would make creating value “extremely challenging”.

Bullish response

Schroders said in its letter that there was “compelling academic and empirical evidence that, on average, acquisitions destroy value for acquiring shareholders.”

But Lewis was bullish in his response to the stinging verdict.

He told journalists today: “We listen to all of our shareholders and with my colleagues, I have engaged with a good number of our shareholders. I have to say I’ve been pleased with the response.

“The thing I draw everyone’s attention to is that we obviously see our position differently. We see the growth opportunity that coming together with Booker represents.”

Lewis added: “We see a multiple, when you include the synergies, which is only 9, so it is a good value deal for us to do, we believe.

“We have identified synergies that are significantly ahead of the earnings of Booker to-date, so we are completely committed to the deal, absolutely, completely committed to the deal.

“I’ve been pleased by the overall response of shareholders, but I recognise what it is Schroders and Artisan have said, I’ve engaged with both of them and will continue to do so.”

SFO fine

Lewis was speaking after Tesco revealed it had agreed to pay a £129m fine to the Serious Fraud Office in the wake of its accounting scandal.

The supermarket giant has reached a Deferred Prosecution Agreement with the SFO in relation to false accounting between February 2014 and September 2014, which means it will not be prosecuted over the £326m black hole.

The settlement relates to the retail division, Tesco Stores, not the wider group and is not an admission of criminal liability. It needs to be approved by Lord Justice Leveson on April 11. 

Tesco has also agreed to a finding of “market abuse” from the Financial Conduct Authority for its trading statement in August 2014.

Investor compensation

The retailer has established a compensation scheme for investors who bought shares or bonds between August 29 and September 19, with each net purchaser of shares entitled to compensation of 24.5p per share purchased, plus interest.

Lewis insisted the settlement would allow the retailer to “move on” from the accounting scandal that rocked its reputation.

“It’s been a very difficult period for Tesco,” he said.

“It was very difficult back in September and October, but I’m proud of the way that colleagues in the business have faced into it.

“It does bring this matter to a close as far as the company is concerned and I think that is important.

“But we are recognising the situation, we are paying the fines, we are paying the compensation and that allows us as a business to move on.”

Lewis added: “I am proud of the fact that we have faced into it. We have done it openly and transparently and I hope people give Tesco some credit for the way, having found itself in a very difficult position, it has responded and dealt with the matter in the way that it has.”