The takeover of Punch Taverrns, one of the biggest deals in the UK pubs sector for several years, is set to go ahead after the competition watchdog accepted undertakings from buyer Heineken.
The Dutch brewing giant agreed to sell pubs in 33 areas to allay the Competition & Markets Authority’s concerns that the takeover would hit choice in those districts and potentially push up prices for drinkers.
Heineken announced last December that it was teaming up with Patron Capital, the private equity firm, to buy Punch for £409m, or £1.78bn once Punch’s debt is taken into account.
The deal will make Heineken, which already owns 1,100 pubs in Britain, the country’s third-largest operator after Greene King and Enterprise Inns.
The Competition & Markets Authority warned in June of the potential impact the deal would have on competition but before carrying out an in-depth so-called ‘phase two’ investigation, which could have taken six months, it offered the companies the chance to come up with remedies that would put those concerns to rest.
The watchdog said today: “Heineken has offered to sell pubs in each of the affected areas to preserve competition and ensure customers in these locations do not lose out.
“The CMA is satisfied that its concerns have been addressed and has therefore decided that the merger will not be referred for an in-depth phase two investigation.”
Image: The Campaign for Real Ale opposed the deal as they said it could put small breweries out of business
The deal is now expected to be completed by the end of the month. Once it is completed, Punch’s pub estate will be split, with 1,895 pubs going to Heineken and the remaining 1,329 going to Patron Capital.
The pubs that Heineken has agreed to sell are a mixture of sites it already owned and venues it will acquire under the takeover. The majority of the sites are in Edinburgh, Glasgow, Newcastle and Leicestershire.
Heineken, the world’s second-biggest brewer after AB InBev, first became a major pub operator in the UK when it teamed up with Carlsberg, the Danish brewing giant, to buy Scottish & Newcastle in 2008 in a deal that also gave it brands such as Foster’s lager, Strongbow cider and John Smith’s bitter.
It is relatively unusual for a major international brewer like Heineken to own pubs and, shortly after the takeover, the company offloaded some of the more poorly performing sites. However, since then, it has come to realise the advantages of owning pubs through which it can sell its beer.
The deal was opposed by consumer groups like the Campaign for Real Ale, which argued that small independent and regional brewers that were currently supplying Punch’s pubs could lose out, if Heineken chose to replace their beers with its own.
Heineken subsequently stressed that Punch tenants would not be obliged to buy solely Heineken products.
Shares of Punch Taverns, which are valued at 180p under the terms of the takeover, were unchanged at 179.25p. They are due to be de-listed next week.