Tesco: Big investors oppose £3.7bn Booker takeover deal

Two of Tesco (Frankfurt: 852647 - news) 's biggest shareholders have called on the supermarket to scrap its planned £3.7bn takeover of wholesaler Booker.

Schroders Investment Management and Artisan Partners are the retailer's third and fourth largest investors, each with stakes of around 4.5%.

They cited concerns over whether the deal was worth it, saying it could represent added distractions and risk.

Tesco, Britain's biggest supermarket, said it had been listening closely to its shareholders.

In a letter to Tesco chairman John Allan, Schroders (Frankfurt: 929969 - news) fund manager Nick Kirrage and global head of stewardship Jessica Ground called on investors who shared their view to speak out.

They argued that such takeovers could "destroy value" for the shareholders of the buying company.

The letter added: "We believe that the high price being paid for Booker makes the destruction of value even more likely."

Schroders also pointed to the "powerful message" about the deal sent by the action of Richard Cousins, chief executive of catering giant Compass, who had quit as senior independent director of Tesco in January ahead of its announcement.

Daniel O'Keefe, lead portfolio manager of Artisan's Global Values fund, told Reuters the takeover would "involve a lot of distraction for management, unforeseen risk, and unforeseen issues".

He said Artisan had expressed its concern to Tesco management, adding: "They're still in favour of the transaction, we're not."

Tesco said: "We always listen closely to the view of our shareholders. We have had a wide series of meetings over the last two months and are pleased with the overall response."

It said it believed the rationale for the deal was "compelling" and that it would enhance the group's recovery plans while delivering "substantial benefits to customers and shareholders" including cost savings.

Tesco added: "Since announcing the transaction the majority of our top 10 shareholders have chosen to increase their shareholding in Tesco and we hope to convince all our shareholders of the merits of the transaction."

Shares (Berlin: DI6.BE - news) in both companies rose when the deal was announced but the supermarket has since slipped back on concerns over a lengthy competition investigation.

Tesco is the UK's biggest supermarket chain while Booker operates the UK's biggest cash and carry network and also owns convenience store brands Premier (BSE: 500540.BO - news) , Londis and Budgens which, operating through franchises, include nearly 5,000 shops.