Competition watchdog toasts £780m Marston's and Carlsberg deal

The UK’s competition watchdog has signed off on a plan for Marston’s (MARS.L) to merge its brewing operations with Carlsberg (CARL-B.CO) UK in a new joint venture worth £780m ($1m).

The Competition and Markets Authority (CMA) on Friday said it had concluded that the combination would not materially damage the beer and pubs markets, despite handing the combined entity a 14% share of the beer market.

Competition between the two companies was “generally limited at present, with Carlsberg largely focusing on the production of lager and Marston's focusing on ale,” the CMA said.

Marston’s is known for ales such as Hobgoblin and Pedigree, while Carlsberg is best-known for its eponymous Danish lager.

Both companies “face several competitors in all of the product categories where they are both active,” the CMA said.

As a result, the CMA concluded the deal was unlikely to seriously lessen competition in the beer or cider market.

Marston’s said in a brief statement it as “pleased” the CMA had approved the deal and confirmed the transaction would close later this month.

Carlsberg said “a number of internal and legal processes remain outstanding” before the deal could complete.

“The joint venture between Carlsberg UK and Marston’s PLC to form the Carlsberg Marston’s Brewing Company, unites two historic brewers with shared values, history and heritage, to create a company with a sustainable future in UK brewing,” said Tomasz Blawat, managing director of Carlsberg UK.

“Today’s decision is a significant milestone in the formation of the new company, which we believe will create significant value for employees, customers and beer-drinkers in the UK, and we look forward to moving to the next stage on this journey.”

The two beer makers announced a plan to combine their UK brewing operations in May. Marston’s will own 40% of the combined venture and will receive a £273m cash payment from Carlsberg up front. Carlsberg will own the remaining 60% of the joint venture.

Shares in Marston’s jumped over 7% in London on Friday. Carlsberg shares were little changed in Copenhagen.

Greg Johnson, an analyst at stockbroker Shore Capital, said unlocking the cash payment for Marston’s would “significantly enhancing the group’s liquidity”.

“With reducing the group’s overall debt position central to management plans, before, during and after the pandemic, the transaction going a long way to meeting targets,” Johnson wrote in an investment note on Friday.

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