Heineken's proposed £400m takeover of Punch Taverns estate faces CMA investigation

Last December, Heineken struck a £400m deal to buy almost 2,000 British pubs from Punch Taverns.

The Dutch brewing company partnered with investment firm Patron Capital to buy the pub chain for £403m. Heineken agreed to pay £305m of the total figure.

As part of the deal, Heineken would take over 1,900 pubs of Punch Taverns’ 3,350 pub estate. Completion of the transaction would make Heineken the UK’s third-largest pub group, after Greene King and Enterprise Inns.

However, the Competition and Markets Authority (CMA) has announced that it found Heineken’s proposed purchase could reduce competition in 33 local areas across Great Britain.

Following CMA’s investigation, Heineken must now offer proposals to address these concerns by 20th June or face another in-depth investigation into the merger.

As part of an initial investigation, the CMA looked at areas where pubs operated by Heineken and Punch currently compete. It has identified 33 local areas 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.

Concerns were also raised with the CMA that the merger would close off an important route to market for brewers that compete with Heineken.

However, the CMA found that the pubs being acquired are only 4% of the GB market and are therefore not a major route to market for brewers.

The CMA also looked closely at whether the acquisition by Heineken could lead to a reduction in the choice of beer and cider on offer in the Punch pubs.

The CMA found that any potential reduction would be limited, taking into account the drinks that Punch currently stocks and the range of drinks available in Heineken-owned pubs.

The CMA also determined that Heineken would not reduce the range of beer and cider, mainly because doing so would risk losing business in pubs where this is important to customers.

Andrea Coscelli, CMA acting chief executive and decision-maker in the case, said: “We have listened very carefully to a range of concerns about this merger.

“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.

“Without sufficient competition from rivals, pubs in these areas might be able to raise prices or worsen the service they offer customers.

“Heineken will now have the chance to offer proposals to address these concerns - otherwise we will carry out an in-depth investigation.”

The merger will be referred for an in-depth phase 2 investigation by an independent group of CMA panel members, unless Heineken is able to offer undertakings which sufficiently address the CMA’s competition concerns.

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