Tesco is to merge with wholesaler Booker in a £3.7bn deal that creates one of the largest own-account operations in the UK, and it is targeting cost savings of approximately £61m in its distribution and fulfillment activities.

In a joint statement to investors, both parties said the merger was expected to enable opportunity for cost synergies of at least £175m, mainly in areas such as procurement and distribution.

Approximately 35% of these cost savings (£61m) will come from distribution and fulfillment activities where “identified cost synergies” in logistics and deliveries would lead to improved services and standards.

Optimising a joint national distribution system of Tesco and Booker, the statement said, is “expected to lead to material benefits” and will include sharing parts of the fleet and expanding click and collect services. Tesco also anticipates savings in relation to final mile deliveries.

Tesco chief executive Dave Lewis said that it had made “significant progress” in turning around its UK retail business and the merger with Booker would: “Further enhance Tesco's growth prospects by creating the UK's leading food business with combined expertise in retail, wholesale, supply chain and digital.”

The Motor Transport Own-Account Top 50 places the total number of vehicles specified against all O-licences for the combined company at 2,336, comprising of 1,549 specified to Tesco and 787 specified to Booker.

Earlier this month Motortransport.co.uk revealed that Tesco is re-tendering the transport services for its frozen operations from Daventry and its fresh operation from Snodland, Kent. This comes after it closed its Welham Green DC in Hertfordshire, moving grocery distribution operations to Reading, alongside the closure of its Chesterfield DC (with general merchandising moving to one DC in Middlesbrough), reducing the number of Tesco DCs from 25 to 23.

As part of the restructure it is “bringing all warehouse operations that are currently carried out by DHL and Wincanton in-house”.

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