Greene King’s £774m planned purchase of rival Spirit Pub Company will be subject to an in-depth investigation unless competition concerns are resolved.
The Competition and Markets Authority said the pair have until 18 May to offer "acceptable undertakings" to its findings that the acquisition could lessen competition in the pub sector in 16 areas.
Under the takeover agreed last November, the companies would have a combined portfolio of more than 3,000 pubs and restaurants. Greene King’s brands include Old English Inns and Hungry Horse; Spirit’s feature Chef & Brewer and Flaming Grill.
Greene King, founded in 1799 in Suffolk, would become the UK’s biggest managed pub business. The CMA’s initial investigation found that around 1,000 Spirit pubs overlap with a Greene King pub in a local area. However there are many alternative pubs, meaning there are fewer competition concerns.
But in 16 areas the parties would operate pubs in close proximity without sufficient competition from rivals.
Sheldon Mills, the CMA’s senior director of mergers, said: "We are concerned this could lead to a rise in the price of food or drink, or a reduction in the quality of those pubs." However, he said that overall there were no major concerns with the transaction.
It will have until 26 May to consider whether any undertakings offered by Greene King to alleviate concerns are acceptable. If the CMA does accept the undertakings, a period of consultation would follow before the formal decision on whether to accept the undertakings in lieu of a phase two investigation.
Rooney Anand, Greene King’s chief executive, said: “This is a sensible decision by the CMA, reflecting a small number of local areas where competition may be diminished as a result of our acquisition of Spirit.
“We are confident we will be able to offer suitable undertakings, which will keep the number of pubs we need to sell to a minimum, and allow the acquisition to complete before the end of June,” Mr Anand added.Reuse content