UPDATE 1-UK regulator tells new Asda owners to fix fuel competition concerns

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LONDON, April 20 (Reuters) - Britain’s competition regulator has found the Issa brothers and private equity group TDR Capital’s 6.8 billion pound ($9.5 billion) takeover of the Asda supermarket chain could lead to higher petrol prices in some parts of the country.

The Competition and Markets Authority (CMA) said on Tuesday the buyers must address its concerns to avoid an in-depth phase two investigation of the deal.

Zuber and Mohsin Issa and TDR completed the purchase of a majority stake in Asda from U.S. giant Walmart in February, having agreed the deal in October.

In a separate deal in February, EG Group, which is also owned by the brothers and TDR, agreed to buy Asda’s 323 petrol stations for 750 million pounds.

EG Group operates 395 petrol station sites in the UK.

The CMA said it found the deal raised local competition concerns in relation to the supply of road fuel in 36 areas across the United Kingdom, and the supply of a specific type of fuel, called auto-LPG, in a further area.

It said it was therefore concerned the merger could lead to higher prices for motorists in these locations.

The CMA has given the buyers five working days to offer legally binding proposals to address the concerns identified.

It then has a further five working days to consider whether to accept any offer instead of referring the case to a phase two probe.

Responding to the CMA, the Issa brothers and TDR Capital said: “We will be working constructively with the CMA over the course of the next 10 days in order to arrive at a satisfactory outcome for all parties within phase one.”

$1 = 0.7153 pounds Reporting by James Davey Editing by Michael Holden and Mark Potter