Refresco’s $1.3bn (£1bn) acquisition of Cott’s bottling operations is expected to receive the green light from the CMA without harsh remedies, paving the way for the takeover of the European soft drinks giant by PAI Partners, according to sources close to the deal.

The Competition and Markets Authority launched a phase one investigation of the Refresco merger with Cott this week to assess whether it will cause any UK competition issues.

The €1.6bn (£1.4bn) offer from a consortium led by French private equity firm PAI - accepted by Refresco last month - is conditional on the completion of the Cott transaction.

Refresco and PAI have been advised by their banking partners Rothschild, Credit Suisse and JP Morgan that the acquisition of Cott should receive CMA approval without the need to sell off assets as the barriers to entry in private-label and contract packing drinks are “relatively low” a City source said.

PAI has made a provision in its offer for some competition remedies to be accommodated, which would allow divestments up to a threshold of about €150m (£133.1m) of sales, the source added.

The CMA has invited interested parties to comment on the deal until a deadline of 13 November, with a decision expected by 22 December.

The Cott deal, announced by Refresco in July, will create the world’s largest independent bottler for retailers and brands in Europe and North America, with a combined production volume of 12 billion litres.

In the UK, Refresco has one factory in Somerset employing about 860 staff, contributing 11% (714.4 million litres) to group volumes of 6.5 billion litres and 18% (€378.6m) of total revenues of €2.1bn in 2016.

Own-label customers include Lidl, Aldi, Tesco and Morrisons in the UK, and the company’s co-packing division makes drinks for the likes of PepsiCo, Coca-Cola and Orangina Schweppes.

Cott volumes in the UK, where it has five factories, make up 28% of the group total, with 70% coming from the US and 2% from Mexico.

The Canadian group, which has global bottling sales of $1.7bn (£1.3bn), works with the big four supermarkets in the UK, along with Spar, Costcutter, Budgens, Wilko, WH Smith and Iceland, as well as contract packing for Monster and Welch’s. The UK branded portfolio includes Old Jamaica, Emerge, Calypso and Ben Shaws.

Its UK revenues fell 9.3% in 2016 to £241.4m as it battled a declining fizzy drinks market and lost a private-label contract.

A City source said the Cott deal was a crucial part of the PAI takeover because of the continuing trend towards own-label penetration growth, as well as co-packing.

“More and more brand owners are transferring manufacturing of products to co-packers, particularly where you have more fragmentation of products and propositions,” the source added.

“It is becoming very difficult for a brand owner to get the efficiencies - and the necessary levels of innovation - from the short run products that they increasingly need to be prepared to produce to cater to changing consumer tastes.”