Tesco's management recently announced that the company agreed the terms of a share and cash merger with a leading U.K. food wholesaler Booker PLC; and that it will recommence paying dividends in the financial year to February 2018. This announcement followed four quarters of consecutive improvement in Tesco's operating performance, while maintaining its U.K. grocery market leadership. We consider that, over the long term, the proposed merger will enhance Tesco's growth prospects and its omni-channel capabilities. At the same time, we believe that Tesco's high pension deficit, resumption of dividends, and execution risks related to the cost optimization strategy and proposed transaction will constrain its credit quality in the next 24 months. Accordingly, we are affirming our 'BB+' long-term corporate
