Britain's competition regulator has given Tesco provisional approval for its £3.7bn takeover of the wholesaler Booker, saying the deal "does not raise competition concerns".
The watchdog began its investigation in May and launched an in-depth probe in July after Tesco and Booker asked for the inquiry to be fast-tracked.
Tesco won provisional approval for its proposed £3.7 billion ($4.9 billion) takeover of wholesaler Booker from the United Kingdom competition regulator on Tuesday, moving Britain's biggest retailer closer to securing a new avenue of growth.
Tesco's plans to merge with wholesalers Booker has been given the green light by the Competition and Markets Authority in a move due to add to the fears some analysts have for the firm.
"This might increase competition in the wholesale market, as well as reducing prices for shoppers", the CMA said.
In particular, it found tha Tesco does not supply the catering sector to which Booker makes over 30 percent of its sales.
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The CMA, recognising that Tesco's shops nevertheless compete with Booker-supplied shops, considered the impact of the merger in every local area where a Tesco and a Booker-supplied shop are both present (over 12,000 shops).
A number of competing wholesalers expressed concern that Booker would benefit from improved suppliers' terms after the merger, making it hard for them to continue to compete.
Shares in Tesco and Booker rose following the announcement. The CMA said rival wholesales argued Booker could raise prices to the shops it supplies.
It also found that the deal would allow Booker to negotiate better terms with its suppliers for some of its groceries but that it...
"This merger has always been about growth, and will bring benefits for independent retailers, caterers, small businesses, suppliers, consumers and colleagues", a Tesco spokesperson said.
The CMA will now take more evidence before making a final decision by the end of December.