Competition watchdog Competition and Markets Authority (CMA) is to begin an investigation into whether the possible £1.28bn merger of pub owner Stonegate and larger rival Ei Group, which would create Britain’s biggest pub operator, would threaten competition.
The CMA has said it has begun its phase 1 investigation following the European Commission’s decision to refer the case to the UK, saying it is considering “whether the creation of that situation (the deal) may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.”
The move comes as the country’s hospitality sector has been rocked by the closure of a number of major restaurant chains this year, while pub operators battle the cost of higher minimum wages as well as dampening consumer confidence due to uncertainties surrounding Brexit.
At the time of the proposed merger announcement EI chairman Robert Walker said that the commercial benefits of combining the two companies were “compelling. Stonegate is committed to continuing to invest in the business for the future benefit of the combined business, tenants and employees. The EIG board believes that this is a combination it can recommend with confidence to shareholders and stakeholders alike,”
EI owns more than 4,000 pubs across England and Wales and has more than 1,800 employees. Meanwhile, private equity backed Stonegate has more than 765 operating outlets. It began trading back in 2010 following the acquisition of 333 pubs from Mitchells & Butlers.