The UK’s consumer watchdog has found that Heineken’s proposed purchase of part of the Punch Taverns estate could reduce pub competition in 33 areas across the country and increase alcohol prices.
The Competition and Markets Authority (CMA) has given the Dutch brewing company until 20 June to address these concerns or face an in-depth investigation into the merger.
In December last year Heineken agreed a deal worth £305 million to acquire more than half of Punch Taverns’ UK estate, making it the third largest pub operator in the county, behind Greene King and Enterprise Inns.
The deal would see around 1,900 pubs join Heineken’s pub business Star Pubs & Bars.
However, the CMA has looked in detail at areas where pubs operated by Heineken and Punch currently compete. The government department identified 33 areas where their 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.
CMA acting chief executive Andrea Coscelli said: “We have listened very carefully to a range of concerns about this merger. The companies will own less than 10% 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. Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers.”
The study did find that Heineken would not have a strong incentive to reduce the range of beer and cider, in part because doing so would risk losing business in pubs.
Responding to the investigation, Heineken said it was ‘confident’ that, after making changes to the deal, the transaction would be approved by the CMA without a Phase 2 referral.
Managing director of Heineken UK David Forde said: “We welcome this positive step towards completing our acquisition of Punch A. 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 A. We are confident we can offer the CMA suitable undertakings to satisfy their concerns.”
The Punch Taverns pubs which form the deal recorded a turnover of £242 million last year, with Heineken confident they will provide a ‘sustainable revenue source’ in the future.
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