In his latest update to shareholders the top investor said that news of the deal is a ‘welcome surprise.’
Tesco announced that it is to acquire Booker, which is a cash-and-carry business, earlier this month.
He continued, ‘Both companies have strong positions in their respective markets and the combined entity should enjoy significant synergies. They will, however, need to get the deal past the competition authorities. Assuming they do, we believe this combination will, by bringing together two of the best management teams in the food business, create value for shareholder.’
Competition authorities may be worried that, as Booker supplies groceries to a number of the convenience store chains in the UK that rival Tesco’s own convenience stores.
Stuart’s fund has returned 63 per cent over the past five years.
He described the latest trading update from another FTSE 100 giant, Pearson, as ‘a less welcome surprise.’
The fund manager said, ‘trading deteriorated significantly at the end of last year and profits were downgraded….But we had assumed its significant cost-cutting programme would offset problems in its higher education business in the US. The company is looking at removing further costs and disposing of its stake in Penguin Random House. All this feels a bit late. While the other businesses are performing in line with expectations, we feel the management have not got a proper grip on the US business so have reduced our position.’
Pearson’s strategy in recent years has been to divest itself of traditional media assets such as the Financial Times newspaper, and invest in online learning products in the US market.
In its most recent set of results, the US business produced a set of results that were below expectations. That sent the shares tumbling, as the market questioned the durability of the strategy.
The largest holdings in the fund are Micro Focus International, BP and Centrica.