Pork Farms’ acquisition of the chilled savoury and pastry business of Irish Food giant Kerry Foods is set to face serious scrutiny from the UK monopoly watchdog amid concerns the deal could create a “substantial lessening of competition” in the sector.

The Competition and Markets Authority (CMA) is worried the deal, which finalised in August, could lead to higher pork pie prices and reduced choice or quality of Scotch eggs and sausage rolls.

It will refer the transaction for an in-depth ‘phase two’ investigation unless the business can address the regulator’s worries in a “clear-cut manner.”

Pork Farms makes the Wall’s and Millers brands under licence from Kerry Foods, and has added factories in Dorset and Lincolnshire as a result of the deal. The combined business represents one of the largest manufacturers in the £1bn CSP sector supplying grocery retailers and c-stores with own-label and branded products, and the CMA said it would face competition from only one of two other large suppliers.

“This merger will further reduce the choice available to retailers and consumers and may give the merged company the ability to raise prices or reduce the quality of these products,” Andrea Coscelli of the CMA said. “Unless Pork Farms offers undertakings that resolve these concerns, we think it is necessary to investigate the merger in greater detail.”

Pork Farms said the CMA’s decision was a “disappointment,” adding it viewed the deal as an ongoing part of a regional growth story that had seen Pork Farms successfully turn around an ailing business following the private equity-backed takeover from Northern Foods in 2007.

Sales have climbed back from £125m to past £150m and it has emerged from operating losses to boost earnings to almost £7m as it embraced innovation as the key to unlocking growth.

A Pork Farms spokesman added: “Quality, choice, service and value for our customers and consumers have always been at the core of our business and this remains the case. We will continue to work closely with the CMA in relation to the transaction to ensure that it has all necessary information to inform the review process.

We continue to believe that the transaction will provide our customers with a streamlined, more responsive and better invested supply chain, reflecting the increasingly competitive retail landscape that we are seeing in today’s markets as consumers’ shopping habits change.”

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