LONDON (Alliance News) - Greene King PLC and Spirit Pubs Co PLC Monday said they intend to offer acceptable undertakings to address concerns that the UK's antitrust regulator, the Competition and Markets Authority, has raised over Greene King's acquisition of Spirit.
The CMA Monday said that Greene King's takeover of Spirit will be referred for an in-depth phase II investigation unless acceptable undertakings are offered.
Spirit said that both parties are now putting proposals to the CMA to address its concerns and are both confident that the proposals will enable the transaction to be approved by the CMA without a phase II referral, and with completion ready to occur by the end of the first half of the year.
Spirit said both parties have agreed to extend the completion date to June 30 from May 31.
Greene King added that it has until May 18 to offer acceptable undertakings and the CMA will have until May 26 to consider them. The CMA will then decide whether to accept the undertakings instead of conducting a phase II investigation.
Greene King agreed to acquire Spirit Pub in a GBP773.6 million deal that values Spirit shares at 115 pence per share last November. Following completion of the deal, Spirit shareholders will own around 28.9% of the combined company, with Greene King shareholders owning the remaining 71.1%.
The CMA's initial investigation found that around 1,000 Spirit pubs overlap with a Greene King pub in a local area. It said that in the vast majority of those areas, it 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 Greene King and Spirit's pubs were in close proximity and were key rivals as they 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.
The CMA found that the transaction gives rise to a "realistic prospect of a substantial lessening of competition in 16 local areas", it said.
The transaction will therefore 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 added.
Greene King runs around 1,900 pubs, restaurants and a small number of hotels in the UK including brands Farmhouse Inns and Hungry Horse. Spirit runs approximately 1,200 pubs in the UK including brands Fayre & Square and Chef & Brewer.
"This is a sensible decision by the CMA, reflecting a small number of local areas where competition may be diminished as a result of our acquisition of Spirit. We are confident we will be able to offer suitable undertakings, which will keep the number of pubs we need to sell to a minimum and allow the acquisition to complete before the end of June," Greene King Chief Executive Rooney Anand said in a statement.
Shares in Greene King were trading down 0.7% at 811.00 pence Monday afternoon, while Spirit shares were trading down 1% at 112.00p.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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