Tesco and Booker have staunchly defended their proposed £3.7bn merger as the impact of the tie-up creates further shockwaves in the convenience sector.

In a joint letter to the Competition and Markets Authority (CMA), which is investigating the deal, Tesco boss Dave Lewis and Booker chief executive Charles Wilson insisted the merger “represents a combination of two complementary businesses” which “operate in distinct market sectors and do not compete with each other”.

Lewis and Wilson hit back at suggestions that the enlarged company “might try to ‘divert’ sales from one part of the business to another by artificially ‘deteriorating’ the offer in either Tesco stores or to Booker retail customers”.

The duo insisted: “We have absolutely no intention to do this.”

The letter went on to insist that “the operational, financial and reputational risks from such a strategy makes no commercial or operational sense.

“The markets we operate in are too competitive, transparent and dynamic even to contemplate such a possibility.

“We would be punished by our customers and they would simply switch to one of our many respective competitors.”

The joint letter was penned to the CMA as it presses ahead with a detailed phase two investigation into the merger, amid concerns it could impact competition within the convenience sector.

Grocery tie-ups

The proposed deal has already created ripples throughout the sector as other retailers and wholesalers consider how to best prepare for the Tesco-Booker combination.

Sainsbury’s had been in exclusive talks with Nisa, but has paused those discussions pending the outcome of the CMA’s probe into the Tesco-Booker merger.

B&M has acquired Heron Foods as it looks to build a convenience chain of its own, while McColl’s has struck what it called a “groundbreaking” supply partnership with Tesco’s big four rival Morrisons, as the Bradford-based grocer builds its wholesale business.

Costcutter has now emerged as the latest chain seemingly considering a similar move after Sir Michael Bibby, boss of Costcutter owner Bibby Line, sent a letter to the chain’s franchisees.

Bibby said the group was “exploring all available opportunities” with regards to a potential “collaboration” and admitted the move was a direct response to the Tesco-Booker deal.

In a letter seen by The Grocer, Bibby said: “When Tesco announced its acquisition of Booker back in January, it took the entire market by surprise.

“Since then, businesses across the grocery and convenience sectors have been open to having discussions that would not have seemed imaginable just one year ago.”

He added: “There are exciting opportunities on the table right now… I hope and expect to be able to make a formal announcement soon.”

Costcutter, which is currently supplied by embattled wholesaler Palmer & Harvey, operates 2,200 c-stores across the UK.

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