LONDON (Reuters) - Britain's competition regulator will investigate Tesco's (TSCO.L) planned 3.7 billion pound agreed takeover of wholesaler Booker (BOK.L) to check if it risks reducing competition and customer choice.
Tesco, Britain's biggest retailer, announced the cash and shares deal in January, seeking a new source of growth given Booker's role as a major distributor to the catering industry.
Booker supplies convenience chains including Budgens and Londis, restaurants such as Wagamama and Carluccio's and also operates the Makro cash and carry business.
The Competition and Markets Authority (CMA) said on Tuesday that its phase 1 investigation would run until July 25.
"During this period, the CMA will assess whether the deal could reduce competition and choice for shoppers and other customers, such as stores currently supplied by Booker," it said.
Interested parties have been given until June 13 to comment.
After its initial investigation, the CMA could clear the deal, ask Tesco and Booker to offer concessions or refer the deal for a more detailed examination that could last up to 24 weeks.
Tesco and Booker have been engaging with the CMA since the deal was announced in January but most analysts see referral to a phase 2 investigation as inevitable given the size and market impact of the deal.
Despite some dissent among Tesco shareholders both Tesco and Booker expect the deal to be cleared and completed by early 2018 at the latest.
Shares in Tesco and Booker were both down about 1 percent at 1210 GMT.
Tesco's cash and shares offer valued Booker at 202 pence a share.
Reporting by Kate Holton and James Davey; Editing by Keith Weir