Completed acquisition by Enterprise Inns plc of the outstanding equity in the Unique Pub Company Ltd

Affected market: Pubs

No. ME/1042/04

Please note that the full text of the decision can be downloaded from the link on the right . What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 22 given on 28 June 2004

PARTIES

Enterprise Inns plc (Enterprise) operates around [5000] (see note 1) leased and tenanted pubs throughout the UK.

The Unique Pub Company Ltd (Unique) operates around [4000] (see note 1) tenanted pubs in the UK. Unique's turnover for the year ending 30 September 2003 was £434.2 million.

TRANSACTION

Enterprise acquired the 83.2 per cent of the shares of Unique it did not already own through the exercise of a call option granted under an agreement made on 20 March 2002. This acquisition ('the principal transaction') was completed on 31 March 2004, therefore the statutory deadline expires on 30 July 2004.

On 19 March 2004, Enterprise reached an agreement to sell to Admiral Taverns Ltd (Admiral) and its subsidiaries 241 pubs (see note 2)('the on-sale agreement').  At completion on 14 April 2004, 239 pubs were actually sold to Admiral (a further two being sold to third parties), 156 of these pubs were from the Enterprise estate and 83 from the Unique estate.

The parties notified the principal transaction on 30 April 2004 and the administrative deadline expires on 29 June 2004.

JURISDICTION

As a result of the principal transaction Enterprise and Unique have ceased to be distinct. The UK turnover of Unique exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. A relevant merger situation has been created.

ASSESSMENT

Shortly before the merger was completed, Enterprise entered into the on-sale agreement to dispose of some 239 pubs to Admiral, essentially, to address any potential competition issues that might arise from the application of the PSD rule. It might be argued that for the period between the principal transaction and the completion of the on-sale agreement the merger might have given rise to a loss of competition at a local level. However, the OFT does not find such an argument persuasive, given the short period of time between the principal transaction and the completion of the on-sale agreement.

Following completion of the on-sale agreement, the parties controlled around [9000] pubs (see note 1) (increment [4000] see note 1)) resulting in a national share of supply in pubs of around 13.3 per cent (increment 6 per cent). In addition, there are no PSD areas in which, following the on sale agreement, the parties' combined share of pubs creates or increases a share of 25 per cent or more.

While the merged entity may enjoy improved buyer power as a result of the transaction, this is not considered to be a factor that could significantly affect competition, given the parties' relatively small share of total beer sales in the UK.

Consequently, and in light of the on-sale agreement, the OFT does not believe that it is or may be the case that the merger has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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