Punch Taverns-Heineken deal could be probed by CMA

Punch Taverns' sale of around 1,900 pubs to Heineken could be investigated by UK financial authorities unless the pair propose a solution to reduce the potential loss of competition in certain areas.

Heineken must now offer proposals to address these concerns by 20 June or face an in-depth investigation into the merger.

As part of its initial investigation, the Competition and Markets Authority (CMA) examined local areas where both companies owned pubs and found 33 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".

While concerns were raised by the industry that the merger would close off an important route to market for brewers that compete with Heineken, the CMA found this was not a major route to market for brewers.

The CMA also suggested there would be a limited reduction in the range of beer and cider available in Heineken-owned pubs and that the company would not have a strong incentive to reduce the range of beer and cider for the risk of losing business.

Heineken said it intended to offer the "acceptable undertakings" stipulated by the regulator and was confident these will enable the transaction to be approved by the CMA without a Phase 2 referral.

"We welcome this positive step towards completing our acquisition of Punch A," said David Forde, Heineken UK managing director.

"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."