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BRUSSELS (Reuters) - Heineken's (HEIN.AS) planned takeover of Punch Taverns (PUB.L) pubs will face an in-depth investigation unless the Dutch brewer addresses competition concerns in 33 locations, Britain's Competition and Markets Authority (CMA) said on Tuesday.
Heineken said it intended to offer acceptable undertakings and that it was confident the CMA would then be able to approve the acquisition without an in-depth study.
"This decision by the CMA acknowledges that there are only a small number of local areas where competition may be diminished due to our acquisition of the pubs," Heineken UK Managing Director David Forde said in a statement.
Heineken and investment partner Patron Capital struck a 403 million pound ($511 million) deal in December to buy and break up Punch Taverns, paving the way for Heineken to become Britain's third-biggest pubs group.
Heineken's part of the deal would see it acquire 1,900 pubs, adding to around 1,100 it already has in Britain.
The CMA said it had looked at areas where pubs operated by Heineken and Punch currently compete and identified 33 local areas where their pubs would not face sufficient competition after the merger, which could lead to price rises and worse customer service.
The CMA said Heineken has until June 20 to offer proposals to address the concerns or face an in-depth investigation into the merger.
The CMA did accept that the merger, which would see Heineken owning less than 10 percent of Britain's pubs, would not close an important route to market for Heineken's brewing rivals and that it would not give the Punch pubs an incentive to reduce the number of available beers and ciders.
Punch said both companies were putting together a plan for the regulator to address the points raised. It also expressed confidence that the deal would be approved without a full investigation.
The CMA did not specify the areas where it had competition concerns nor say how large they were.
In 2015, it had expressed similar concerns about competition in 16 areas in relation to Greene King's (GNK.L) planned purchase of Spirit Pub Company. It approved the deal without a full investigation after Greene King offered to sell 16 pubs.
($1 = 0.7885 pounds)
Reporting by Philip Blenkinsop in Brussels and Rahul B in Bengaluru; editing by Louise Heavens and Jason Neely