The Competition and Markets Authority (CMA) has suggested the undertakings provided by Pennon Group are likely to be acceptable to allow its merger with Bristol Water without need for a phase two merger review.
In December the CMA suggested the deal may undermine Ofwat’s ability to regulate and requested Pennon to address its concerns before 31 December to avoid pursuing the in-depth investigation. The CMA began its inquiries into the acquisition under the terms of the Water Industry Act when the deal was announced in June 2021.
The CMA said it: “considers there are reasonable grounds to believe that the undertakings offered by Pennon on 31 December 2021 might be accepted by the CMA under the Water Industry Act 1991”. This would mean the deal could be cleared without a Phase 2 review.
The CMA confirmed it would launch a consultation on the undertakings provided by Pennon, which is expected to conclude by 7 March.
Pennon acquired the water-only company Bristol Water for £425 million after selling its Viridor waste management business for £4.2 billion. The funds were used to pay a special dividend, buyback shares and pay into pension funds as well as adding Bristol to the Pennon Group, which comprises South West and Bournemouth Water also.
Pennon has not ruled out further acquisitions in the English water market and was understood to have run the rule over Northumbrian and Southern Water.
Bristol is the oldest water company in the country having been established 175 years ago to provide clean water supplies to the city during a cholera outbreak.
Meanwhile, the CMA has also launched a merger inquiry into the acquisition of a minority stake in gas distribution network SGN by Brookfield Asset Management.
In August, SSE and the Abu Dhabi Investment Authority agreed to sell their respective 33.3% and 16.7% stakes in the company to a consortium comprised of Brookfield Super-Core Infrastructure Partners and the Ontario Teachers’ Pension Plan. The deal will see Brookfield take a 37.5% stake and the Ontario Teachers’ Pension Plan add another 12.5% to the 25% stake it already owns to give them equal holdings. SSE said it would receive £1.2 billion for the sale of its share in SGN.
The CMA said it will make a decision as to whether to launch a phase two investigation into the transaction by 8 March.
Shortly before Christmas, OMERS Infrastructure agreed to sell its 25% stake in SGN to Global Infrastructure Partners for an undisclosed sum.