Heineken untroubled by extended CMA investigation into Punch Taverns acquisition

Back in December 2015, Heineken, which is the second biggest brewer in the world and also owns brands such as Amstel and Tiger Beer, announced it was tabling a bid to buy 1,900 pubs across the UK. The deal built on its existing footprint in Britain, first started through the purchase of Scottish & Newcastle’s operations in 2008, and a reflection of Heineken’s feeling that there is a “compelling strategic rationale” for enlarging its existing pub business in the UK.

Paying a total of £305m for the 1,900 pubs in Punch Tavern’s portfolio, it would make Heineken the third largest pub business in the UK.

However, as expected, the deal was referred to the Competition and Markets Authority (CMA) for approval, which on 20 February extended its preliminary assessment period of its first phase review.

The latest development in the acquisition is a move to take the transaction through a phase two investigation, unless Heineken offers to address points perviously raised.

Commenting on the move, Heineken UK managing director 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 locals areas where competition may be diminished due to our acquisition of the pubs.

“We are confident we can offer the CMA suitable undertakings to satisfy their concerns.”

The CMA has said, in a statement, Heineken must offer proposals to address the concerns by 20 June of face on “in-depth investigation” into the deal. Some 33 local areas where pubs would not face sufficent competition after the transaction were identified by the CMA – possibly leading to price incerases or a “deterioration in quality”.

Andrea Coscelli, CMA acting chief executive, commented: “We have listened very carefully to a range of concerns about this merger. The companies will own less than ten per cent 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.”

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