Competition watchdog investigates £3bn pub deal

The UK’s Competition and Markets Authority (CMA) has launched an investigation into Stonegate’s £3 billion purchase of the the Ei Group, which was announced in July this year.

Stonegate, which owns Be At One and Slug & Lettuce, is hoping to acquire Ei’s 4,000-strong pub estate, taking its total number of sites to 4,765 and creating what will be the UK’s largest pub group.

In a statement the CMA said it would be investigating whether the deal “will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002”, and if so, whether the new business “may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”.

Last Friday (11 October), the CMA launched the first phase of its investigation after the European Commission referred the case under article 4(4) of the EC Merger Regulation.

Interested parties are invited to submit comments on the transaction until 25 October, with a decision on the deal expected on 16 December.

The deal was expected to be completed in early 2020. Stonegate has valued Ei’s shares at £1.3 billion, with the deal itself worth £3 billion including debt.

Simon Townsend, the chief executive of Ei Group, told The Financial Times that the inquiry was “exactly as expected” and “in line with the timetable”.

It follows news of the approval of Greene King’s £4.6 billion takeover by Hong Kong tycoon Li Ka-Shing’s CK Asset; triggering fears about pub closures and a pay dispute with workers.

Back in February this year, the Campaign for Real Ale revealed that UK pubs are still closing at a rate of 14 per week. Total beer sales fell by 2.2% between April and June this year, compared with the same period in 2018, according to figures published by the BBPA, bringing pub owners’ expectations back to normal after last summer’s World Cup boost.