Competition watchdog investigates Stonegate pub deal

Owners of the Slug & Lettuce pub chain are under investigation by the Competition and Markets Authority over their £1.28 billion takeover of rival Ei Group.

The watchdog launched a “Phase One” inquiry and has invited the industry to submit evidence over whether the deal could lead to a reduction in competition in the pubs sector.

Typically, most major deals are looked at by the CMA but if there is real cause for concern a “Phase Two” in-depth inquiry could be launched.

The Country House Pub
The Country House Pub in South London is one of the 4,000 new owners Stonegate hopes to buy (EIG/PA)

The CMA said 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.”

Stonegate’s deal with Ei Group – formerly known as Enterprise Inns – was first announced in July and would make it the biggest pub owner in the UK.

The new owners completed a £1.3 billion debt raising to fund the deal, and it will see them control 4,000 pubs and properties across the country.

The deal is the second for TDR Capital, the private equity firm which owns Stonegate, after it bought We Buy Any Car owner BCA Marketplace for £1.9 billion last month.

The company explained at the time: “With greater scale and diversification, Stonegate believes that the combined group will be better positioned to compete effectively in what is expected to be a challenging operating environment for the foreseeable future, which would be to the benefit of all stakeholders including tenants, employees, customers and local communities.”

Stonegate was first set up by TDR in 2010 as a vehicle to buy 333 pubs from Mitchells and Butlers.

The company has subsequently spent £350 million on expansions and now has more than 765 sites following 11 acquisitions in the last nine years.

The CMA said it will make a decision on what happens next by December 16.

Previous deals to have gone to a Phase Two decision include Sainsbury’s failed takeover of Asda and Tesco’s successful purchase of wholesale business Booker.

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