Tesco, Booker defend tie-up plan, say suppliers will benefit

Aug 24 (Reuters) - British supermarket group Tesco (Frankfurt: 852647 - news) and wholesaler Booker have rejected suggestions their planned 3.7 billion pound ($4.8 billion) tie-up will hurt suppliers, saying they should benefit from growth and lower costs as a result of the deal.

Tesco, Britain's biggest retailer, agreed a buy food supplier Booker in January to tap into the fast growing catering sector.

However, the deal is subject to an in-depth investigation by Britain's Competition and Markets Authority (CMA).

"We believe that suppliers will support the proposed merger – and the opportunities it brings for them, in terms of growth and additional revenue and/or in terms of efficiency and reduced cost," Tesco Chief Executive Dave Lewis and Booker counterpart Charles Wilson said in a joint letter to the CMA's merger inquiry group. (http://bit.ly/2vioqtb)

On concerns the companies might divert sales from one business to another by deteriorating the offer in either Tesco (Swiss: TSCO.SW - news) stores or to Booker retail customers, the CEOs said they had "absolutely no intention to do this".

Booker supplies services to over 5,000 stores operating under the Premier (BSE: 500540.BO - news) , Londis, Budgens and Family Shopper brands, while Tesco runs more than 3,000 stores across Britain

"We operate in distinct market sectors (wholesale and retail) and do not compete with each other," the statement added.

The CMA's in-depth phase 2 investigation lasts 24 weeks. Its final report will be published before Christmas, following an earlier provisional findings report.

($1 = 0.7791 pounds) (Reporting by Rahul B in Bengaluru; Editing by Mark Potter)