Competition body raises concerns over pub group merger

The George, Southwark

Greene King’s proposed £774m takeover of rival Spirit Pub Company faces fresh scrutiny after the UK’s competition said the deal will be referred for an in-depth investigation unless acceptable undertakings are offered.

Greene King runs approximately 1,900 pubs, restaurants and a small number of hotels in the UK, while Spirit Pub Company runs approximately 1,200 pubs.

The Competition and Markets Authority’s (CMA) initial investigation found that around 1,000 Sprit pubs overlap with a Greene King pub in a local area.

In the vast majority of these areas, the CMA does not have any competition concerns given the many alternative pubs offering similar eating and drinking options.

However in a small number of areas, the CMA found that the parties’ pubs were in close proximity, were each other’s key rivals and did not face sufficient competition from other outlets, meaning that the loss of that competition may lead to an increase in prices or a deterioration in the quality of the offering.

As a result, the CMA, says the transaction gives rise to a “realistic prospect” of a substantial lessening of competition in 16 local areas.

It has ordered the merger to be referred for an in-depth phase 2 investigation unless Greene King and Spirit offer acceptable undertakings to address the CMA’s competition concerns in a clear-cut manner. It did not specific what the “acceptable undertakings” may involve, but it is likely to include Greene King agreeing to sell off some of the pubs.

Sheldon Mills, CMA senior director of mergers and decision maker in this case, said: “Greene King and Spirit together operate over 3,000 pubs and restaurants across the UK, offering customers a wide range of eating and drinking choices under some well-known brands. Overall, we did not find major concerns with this transaction, given that most of the parties’ pubs face local competition from national pub chains or independent rivals.

“In a small number of areas, we found that after the merger the parties would operate pubs in close proximity without facing sufficient competition from rivals and 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. Greene King and Spirit now have the opportunity to resolve these concerns by offering appropriate undertakings.

Greene King and Spirit now have until 18 May 2015 to offer an undertaking to the CMA. If no undertaking is offered or accepted, then the CMA will refer the merger to an independent inquiry group.

Greene King’s brands include Eating Inn, Farmhouse Inns, Flame Grill, Hungry Horse, Meet & Eat, Old English Inns, Metropolitan Pub Company and Loch Fyne Seafood and Grill. Spirit, meanwhile, operates brand such as Chef & Brewer, Fayre & Square, Flaming Grill, Golden Oak Inns, Good Night Inns, John Barras, and Taylor Walker.

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