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Ei Group confident it can address local competition concerns raised by the CMA

The CMA has investigated the potential impact of the merger in more than 500 local areas across the UK, in which both businesses currently have premises.

Ei Group PLC -

The Competition and Markets Authority (CMA) said the proposed takeover of Ei Group PLC (LON:EIG) can go through if some local issues are addressed.

The CMA said the Stonegate Pub Company's proposed purchase of Ei Group does not raise UK-wide competition concerns but could damage competition in 51 local areas where both pub groups currently operate boozers.

The combined company would operate around 5,000 pubs in the UK, including chains such as the Slug & Lettuce and Yates, and would be the largest pub group in the UK but the CMA was happy that the group would continue to face competition at the national level.

Stonegate and Ei have until 13 December – Friday the 13th – to submit proposals to the CMA addressing the regulator’s concerns about competition concerns in the 51 identified areas where pub goers “could be faced with price increases or lower quality products and services.”

If proposals are not offered or do not sufficiently address the issues raised, then the merger will be referred for an in-depth Phase 2 investigation by the CMA.

Ei Group welcomed the decision and said it would, in conjunction with Stonegate, put proposals to the CMA to address the concerns that it has raised.

“The parties are confident that these proposals will enable the transaction to be approved by the CMA without a Phase 2 referral and our expectation remains that the transaction will complete in the first quarter of 2020,” the company formerly known as Enterprise Inns said.

Liberum reckons the competition concerns raised in 51 local areas could be easily addressed through the disposal of 40 to 50 pubs and noted that "the group has been prepared to dispose of up to 100".

"Recent acquisitions by NewRiver, Marstons/Admiral and Fullers highlight the strong demand for small-medium pub portfolios," Liberum said.

Shares in Ei Group were up 0.4% at 283.2p in early deals.

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