Competition watchdog warns Heineken and Punch Taverns must resolve concerns over pub merger

Caitlin Morrison
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The CMA is worried about competition among local pubs (Source: CMA)

The competition watchdog has warned that Heineken and Punch Taverns have problem areas to address before going ahead with their proposed deal.

Punch shareholders approved Heineken's 180p per share takeover offer in February, after the Dutch brewing giant won a bidding war with entrepreneur Alan McIntosh, one of Punch's founders.

However, less than a week after investors gave the deal the green light, the Competition and Markets Authority (CMA) opened an investigation into the takeover.

Today, the CMA said it had identified 33 local areas across Great Britain where the deal could reduce competition.

The watchdog said the newly combined company's pubs "would not face sufficient competition after the merger, which could lead to price increases or a deterioration in the quality of the service on offer".

However, the regulator added that the pubs being acquired are only a very small part (four per cent) of the British market and are therefore not a major route to market for brewers – "which was backed by evidence from brewers showing that these Punch pubs typically account for only a small proportion of all of their sales to pubs".

"We have listened very carefully to a range of concerns about this merger. The companies will own less than 10 per cent of all British pubs after any deal, but we are concerned about the loss of competition for pub goers in a number of local areas," said Andrea Coscelli, CMA acting chief exec.

"Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers."

Heineken has until 20 June to address the CMA's concerns. If it fails to do so, the authority will refer the merger for an in-depth Phase 2 investigation.

David Forde, managing director for Heineken UK, said: "We welcome this positive step towards completing our acquisition of Punch. This decision by the CMA acknowledges that there are only a small number of local areas where competition may be diminished due to our acquisition of the pubs in Punch. We are confident we can offer the CMA suitable undertakings to satisfy their concerns."

Meanwhile, Punch said in a statement to the London Stock Exchange that it's confident the proposals offered by the companies to the watchdog "will enable the transaction to be approved by the CMA without a Phase 2 referral and that completion will occur by the end of August 2017 as communicated previously".

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