Tesco Gets More Investor Pressure to Sweeten Booker Price

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(Bloomberg) -- Tesco Plc faces growing investor pressure to sweeten its 3.9 billion pound ($5.5 billion) offer for wholesaler Booker Group Plc ahead of a shareholder vote in less than two weeks.

Alpine Associates Management Inc. opposes Tesco’s offer on the existing terms and believes Booker shareholders should vote against the deal, the investor said Friday by email. Alpine has an economic interest of 2.4 percent in Booker.

Alpine is voicing concerns on the heels of activist investor Sandell Asset Management Corp., which said Tesco is getting Booker “on the cheap,” and a recommendation against the deal from investor adviser Institutional Shareholder Services. The purchase, announced more than a year ago, is subject to approval by 75 percent of Booker shareholders at a meeting on Feb. 28.

Tesco has offered a mix of cash and stock worth 218 pence a share based on Thursday’s close for the Wellingborough, U.K.-based wholesaler. Sandell has said that it’s seeking an offer of 255 pence to 265 pence and that it has a 1.75 percent economic interest in Booker.

Tesco Chief Executive Officer Dave Lewis may now have to tiptoe between pleasing Booker investors without alienating his own shareholders, some of whom were already skeptical of the deal. In March, Schroders and Artisan Partners, two of Tesco’s top five investors, went public with their views that the deal would destroy shareholder value.

Artisan managing director Daniel O’Keefe told Bloomberg News this week that he still believes Tesco should focus on the turnaround of its core business, and that he intends to vote against the deal.

Click here for a Gadfly commentary on the deal

Tesco shares closed 0.4 percent higher at 204.6 pence, and Booker rose 0.5 percent to 225 pence.

With the purchase, Tesco would gain the services of Booker CEO Charles Wilson. The U.K.’s largest retailer has named him to lead its British and Irish operations, a key role that positions the 51-year-old as a potential successor to Lewis.

Alpine manages assets worth $1.8 billion. Its primary strategy is merger arbitrage, and it has a short position in Tesco that’s equivalent to 0.45 percent of the company’s outstanding shares.

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