Tesco and wholesaler Booker Group – which includes the Premier, Londis and Budgens symbol groups – are merging to create “the UK’s leading food business”.

The firms have said the deal will enable them to better serve the fast-growing ’out of home’ food market, and help independent retailers, caterers and small businesses by improving choice, price and service.

They have also said it presents a “broader market opportunity” for suppliers, and offers strong growth prospects and a “clear opportunity to develop better own brand and fresh ranges”.

“By bringing together Tesco and Booker’s retail and wholesale expertise, supply chain and digital capabilities, the combined group will be able to provide greater choice, quality, price and service in the food market, whilst improving efficiency and reducing food waste,” said the firms in a statement.

“The combined group will bring together the capacity and capability to generate new growth and deliver significant revenue and cost synergies.”

Joining with Tesco has the potential to bring “major benefits” to end consumers, customers, suppliers, staff and shareholders, said Booker chief executive Charles Wilson.

The deal values the Booker business at £3.7bn.

"Booker is committed to improving choice, prices and service for the independent retailers, caterers and small businesses that we are proud to serve,” added Wilson.

The merger followed “significant progress in turning around our UK retail business”, said Tesco boss Dave Lewis.

“This merger with Booker will further enhance Tesco’s growth prospects by creating the UK’s leading food business with combined expertise in retail, wholesale, supply chain and digital,” he added.

“Wherever food is prepared and eaten - ’in home’ or ’out of home’ - we will meet this opportunity with the widest choice and best service available."

Booker Wholesale describes itself as the UK’s largest cash and carry operator, supplying branded and private-label goods to more than 503,000 customers including independent convenience stores, grocers, leisure outlets, pubs and restaurants. It currently lists around 18,000 product lines including grocery, fresh and frozen food, beers, wines, spirits, tobacco and non-food items.

The Booker business also includes Makro cash and carry stores; food and drink suppliers Booker Direct, Classic Drinks, Ritter Courivaud and Chef Direct; and retail fascia Premier, Family Shopper, Budgens and Londis.