London - Heineken
NV offered to make concessions as the UK’s antitrust
regulator warned that the company’s planned purchase of 1,900 Punch Taverns pubs
could reduce competition, leading to price increases and poorer service.
The Competition and Markets Authority said on Tuesday it had
identified 33 local areas where Heineken and Punch pubs would not face
sufficient competition after the merger. Heineken must now offer proposals to
address these concerns by June 20 or face an in-depth investigation into
the merger, the UK regulator said in a statement on its website.
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“We are confident we can offer the CMA suitable undertakings
to satisfy their concerns,” Heineken UK Managing Director David Forde said in a
statement.
Heineken teamed up with Patron Capital in December to buy
Punch Taverns for 402.7 million pounds ($510 million), edging out a co-founder
of the company who was also preparing a bid. The deal would see Patron pay 180
pence a share in cash, and Heineken would in turn pay the investment company
305 million pounds for 1,900 pubs. The purchase would add to the 1,049 taverns
Heineken controls in the UK
through its Star Pubs & Bars business.
“We have listened very carefully to a range of concerns
about this merger,” said Andrea Coscelli, the CMA’s acting chief
executive. “The companies will own less than 10 percent 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.”
If the regulator’s concerns centre on one pub per area,
about 2 percent of the acquired establishments will have to be sold, which is
unlikely to change the merits or the economics of the deal, Societe Generale
analysts led by Andrew Holland wrote in a note to investors.
Punch Taverns shares were up 2.1 percent in early London trading, while Heineken fell 0.3 percent in Amsterdam.
Punch said the companies are putting together proposals to
address the regulator’s concerns. The parties are “confident” that these
proposals will enable the transaction to be approved by the CMA without an
in-depth investigation and that completion will occur by the end of August 2017
as communicated previously.
In 2015, Greene King Plc offered to sell about 16 Spirit Pub
Co. bars to win approval for their merger in the face of a possible CMA probe.