The takeover of UK-based Priory Group by US healthcare group Acadia has been referred for an in-depth investigation to the Competition and Markets Authority (CMA).
Acadia, an operator of psychiatric hospitals, announced the takeover deal for Priory, which is known for its celebrity rehab patients, in January.
The companies said the deal will consist of shares and cash, with Acadia trading £1.3bn in cash, including £925m to be used to repay outstanding debts, and 5.4m shares to acquire the UK healthcare company.
The CMA said today it had identified 20 local areas across five mental healthcare services where “there could be a substantial lessening of competition”.
It said the merger will therefore be referred for an “in-depth phase two investigation” by an independent group of CMA panel members “unless Acadia is able to offer undertakings which address the CMA’s competition concerns”.
Acadia’s chairman and chief executive Joey Jacobs said the company was “disappointed by the CMA’s decision to refer this transaction for a phase 2 investigation”. He said the group would “explore how best to satisfy the CMA’s concerns” and expects to hear from the authority again by 28 July.
If the phase two investigation goes ahead, Acadia expects it to last for around nine months.
Andrea Coscelli, acting chief executive and decision-maker in the first phase of the investigation, said: “Customers have raised concerns with us about the merger and how it might affect their ability to obtain quality services at the best possible price.
“There are relatively few private providers for many of these services in England and Wales and, if the merger goes ahead, the incentives on providers to continue to supply the NHS with value for money services will reduce. While quality of care is the main consideration when making referral decisions, cost is clearly another important factor when such services are funded by the public purse.
“The bargaining position of the NHS organisations and local authorities funding the treatment is stronger when they have a choice of providers.”
She added: “These issues mean an in-depth investigation is required, unless the companies are able to offer undertakings which address our concerns.”