Tuck in to Booker

Makro will add more than 1m customers in the UK, £800m of sales and a significantly broader product range. What's more, it has been acquired on favourable terms, the consideration of just under £140m will be largely satisfied through issuing new shares. True, that will dilute the interest of existing shareholders, but they approved the deal this week.

They're right to back it. Makro is currently loss-making, which means Booker's earnings this year will take a 10 per cent hit. But analysts reckon that the acquisition could add a fifth to earnings by 2015 as Booker exploits synergies and implements operational improvements. The deal also brings over £60m in tax losses, £200m in freehold assets, and - perhaps most interesting - a heavyweight shareholder in Metro. The German retailer will end up owning 10 per cent of Booker and is locked in for a year, but some analysts suggest it's likely to remain on the shareholders' register for the long term and will work closely with Booker on big projects. Clive Black at broker Shore Capital ponders whether the two will collaborate in India, where Booker has made small but successful steps to open wholesale depots servicing small 'kirana' store customers in Mumbai and Pune.

Of course, the Makro chain is much larger than anything Booker has acquired before and has more exposure to cyclically-affected non-food categories. But chief executive Charles Wilson has proved his ability to mastermind large turnarounds with the improvement he has driven at Booker itself. Since being spun out of the Big Food Group in 2007 - after its parent's ill-fated flirtation with Icelandic investment group Baugur - Mr Wilson's strategy has seen continuous year-on-year increases in sales and, more importantly, operating profit, which has risen from from £46m in 2008 to £89m last year. A focus on cash generation means that Booker has swung from carrying net debt of £47m in 2008 to having net cash of £63m in 2012.

That is all the more impressive given the huge investment that has been made in the business in the past five years. As well as making acquisitions to boost its catering business, Booker has invested heavily in refreshing its store portfolio; 142 of its 172 outlets have been converted to the larger 'Extra' format, with the final 30 to be completed in the next year or so. These allow Booker to showcase its own-label products better. As a result, sales growth in ranges such as its value brand, Euro Shopper, and the catering focused Chef's Larder have been in the double digits.

Expansion of its catering division and a steady move into India offer significant long-term potential. Catering sales have climbed from £0.85bn in 2008 to more than £1.2bn today, helped by successful acquisitions, such as Ritter Courvaud. What's more, catering sales come mainly from smaller customers, meaning there is a huge opportunity to target larger pubs and restaurant chains. A state-of-the art facility has been opened to underpin a push in the Chef Direct foodservice.