The watchdog also ruled that the move was unlikely to increase prices or reduce services in locations with both a Tesco and a Booker-supplied supermarket due to the strong competition that exists in both the grocery wholesale and retail markets. In particular, Tesco does not supply the catering sector, which accounts for over 30 per cent of Booker's sales, the report said.
Shares in Tesco (LON:TSCO) have jumped almost five percent in London this morning, as Britain's competition watchdog cleared provisionally the grocer's tie-up with wholesaler Booker Group (LON:BOK).
The CMA found that Tesco as a retailer and Booker as a wholesaler, supplying to caterers, independent and symbol group retailers, did not compete head-to-head in most of their activities.
The Competition and Markets Authority (CMA) said it founded that the merger between Tesco and Booker, a wholesaler which supplies the Premier, Londis and Budgens convenience stores, would not threaten competition.
A raft of rival wholesalers have raised concerns the deal could see Booker benefit from improved supplier terms making it hard for them to compete.
The U.K. regulatory body referred the merger for further investigation in July as it believed the deal could lead to worse terms for shoppers.
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It found that it was likely Booker would be able to negotiate better terms from a number of its suppliers for some groceries, and that it was likely to pass on some of the benefits of these savings to the shops that it supplies.
The CMA will make its final decision by the end of December.
'The competition regulator can expect a postbag full of angry letters from convenience shop owners before it comes to a final decision next month, ' said Laith Khalaf, senior analyst at Hargreaves Lansdown.
It means Tesco will not have to sell off businesses, such as its One Stop convenience chain, for the merger to go through - with early 2018 set for the deal to complete.
The Times quoted analysts at Bernstein as saying that the CMA's provisional approval was a positive catalyst for Tesco's share price as it reduced uncertainty over this deal.
"The risk is that just as the good ship Tesco is steadying, it gets blown off course by the Booker deal", he said.