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Heineken to offer deal concessions to appease UK regulator

Jun 13 2017 11:00
Gaspard Sebag and Thomas Buckley, Bloomberg

London - Heineken 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.

“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 £402.7m, 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 £305m 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% 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% 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% in early London trading, while Heineken fell 0.3% 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 offered to sell about 16 Spirit Pub bars to win approval for their merger in the face of a possible CMA probe.

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