Two of Tesco's top shareholders oppose £3.9-bn proposed acquisition of Booker

Britain's biggest supermarket chain Tesco's planned acquisition of grocery wholesaler Booker has run into trouble with two of its big shareholders opposing the deal.

Schroders and Artisan Partners, who hold a combined 9 per cent of Tesco, have asked the retailer to abandon the deal since it is overpaying and the overpriced purchase will hamper its own turnaround plan.

In a letter written to Tesco by Nick Kirrage, a fund manager at Schroders, and Jessica Ground, the global head of stewardship at the firm, ''We believe the high price being paid for Booker makes the destruction of value even more likely. We will be encouraging other shareholders who share our views to voice them. Thus we urge you to reconsider and withdraw your offer.''

In January this year, Tesco offered to buy Booker £3.9 billion in order to create ''the UK's leading food business.''

The deal is subject to majority consent from Tesco shareholders, and opposition from two of its major shareholders could prove an impediment to closing the transaction.

Booker owns the Londis, Budgens, Premier Foods and Faamily Shopper shop brands, and supplies goods to around 120,000 cash-and-carry customers.

Apart from independent convenie­nce stores, Booker supplies pubs, nursing homes, workplaces and restaurant chains such as Wagamama and Byron, and operates cash-and-carry depots.

But soon after the deal was announced, Tesco's senior independent director Richard Cousins resigned in opposition to the proposed deal.

The Financial Times reported that Daniel O'Keefe, a fund manager at Artisan Partners, described Tesco as a ''train wreck'' that has over the last decade ''expanded into new businesses [and] new geographies''.

Despite the opposition, Tesco has said that it will go ahead with the deal as a majority of its shareholders support the proposed acquisition.

A Tesco spokesperson said, ''We have been working on the transaction for over 12 months and believe the strategic and financial rationale is compelling. We are confident that it will enhance our recovery plans for Tesco and deliver substantial benefits to customers and shareholders.''

''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,'' the spokesperson added.