(Adds details on concerns, background)
June 24 (Reuters) - Australia's competition regulator expressed concern on Monday over AP Eagers Ltd's APE.AX A$836 million ($580 million)proposed takeover of smaller auto retailer Automotive Holdings Group Ltd (AHG) AHG.AX .
The Australian Competition and Consumer Commission (ACCC) said its preliminary concerns were over competition in new car retailing in the Newcastle and Hunter Valley region of New South Wales state.
"A combined AP Eagers and AHG would operate 46% of new car dealership sites in the Newcastle/Hunter Valley region, including those for the 10 most popular brands, and runs 54% of the dealership sites selling those brands," ACCC Acting Chair Delia Rickard said.
The ACCC added however that the proposed deal was unlikely to lessen competition in the major cities like Melbourne, Sydney and Brisbane.
AP Eagers was not immediately available for comment. AHG declined to comment.
The commission is also looking into whether the proposed deal would reduce competition in the supply of authorised parts and the market for servicing of new cars in the Newcastle and Hunter Valley region.
The regulator said it was also seeking submissions about whether a divestiture would address competition concerns in the concerned region.
AP Eagers and AHG shares were down 1.5% each while the broader market .AXJO was slightly lower.
In May, AHG recommended AP's sweetened takeover offer. = 1.4413 Australian dollars)