Booker stakeholder attacks Tesco offer as too cheap

Sandell Asset Management Corp, which has an economic interest of 1.75% in Booker, has expressed its views in a letter to Booker’s board.

Sandell chief executive Tom Sandell said: “In Booker, Tesco is getting a great asset and a great management team on the cheap.”

He continued: “Unless the consideration is increased, we do not believe that shareholders should vote in favour of the deal at the upcoming shareholder meeting.

“We are strong believers in Booker as a standalone entity and have confidence in its management team for the long term.

“Ultimately, if Tesco is unwilling to raise its offer to a fair level, we believe Booker shareholders would be better off rejecting the offer.”

The stakeholder maintains that plans to pay only 65% of full-year 2018 earnings as a closing dividend is “unjustified” and that Booker should pay all of those earnings to shareholders.

It argued that Tesco stock – which would make up part of the offer for Booker – “is a poor currency” and “inferior” to Booker stock, that the premium being paid is “well below the average premium of approximately 25% for strategic acquisitions of UK PLCs over the past 10 years” and that the deal’s “synergies disproportionately accrue to Tesco shareholders”.

‘World-class management’

Additionally, Sandell claimed that Booker “shareholders deserve a premium for Tesco gaining a world-class management team”.

Booker chief executive Charles Wilson is to head Tesco’s UK retail and wholesale business, replacing Matt Davies.

Sandell noted: “There is even press speculation that Mr Wilson is in line to become the next CEO of Tesco.

”Sandell believes that this highlights the quality of Booker’s management team and the additional value of taking Booker under Tesco’s control. Unfortunately, it does not seem to be accounted for in the current premium offered to Booker shareholders”.

Sandell said, “a fair value of 255-265p per share is reasonable and well above the offer’s current market value”.