Rentokil Initial PLC (LON:RTO) saw its shares fall on Thursday following news the Competition and Markets Authority (CMA) has referred the group‘s proposed acquisition of Cannon Hygiene for an in-depth investigation after the companies failed to address its competition concerns.
In a statement, the CMA pointed out that after an initial phase 1 investigation, it found that the merger could lead to a "substantial lessening" of competition.
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The regulator said the deal would be referred for a phase 2 probe after Rentokil indicated that it would not offer undertakings to address the concerns raised.
The CMA noted that Rentokil and Cannon - which install and maintain equipment such as air sanitisers, feminine hygiene units and soap dispensers - are two of the three largest specialist providers of products and services found in washrooms across the UK.
The watchdog said it had found that, if the merger goes ahead, “the companies could face very limited competition from other suppliers of washroom products and services."
The deadline for the final CMA report is 12 December 2018.
In afternoon trading, Rentokil shares were 2% lower at 341.8p.