The Competition and Markets Authority has launched a merger inquiry into the completed acquisition by Pennon Group plc of Bristol Water Holdings UK Ltd.
The Competition and Markets Authority has launched a merger inquiry into the completed acquisition by Pennon Group plc of Bristol Water Holdings UK Ltd.
The CMA has decided to investigate the transaction and has served an initial enforcement order under section 72(2) of the Enterprise Act 2002 in relation to the acquisition.
The order says the CMA has “reasonable grounds for suspecting that it is or may be the case that Pennon Group plc and Bristol Water Holdings UK Ltd (BWHUK), the parent company of Bristol Water plc “have ceased to be distinct.”
Under section 32(b) of the Water Industry Act 1991 the CMA is considering whether a merger of two or more water enterprises has taken place.
In addition, the CMA is also considering whether a merger situation has been created and whether this has resulted - or may be expected to result - in a substantial lessening of competition in the UK market.
Under the terms of the order, Pennon, BWHUK and Bristol Water are not allowed to take certain actions, except with the prior written consent of the CMA, including any action which might:
- lead to the integration of the Bristol Water business with the Pennon business;
- transfer the ownership or control of the Pennon business or the Bristol Water business or any of their subsidiaries; or otherwise impair the ability of the Bristol Water business or the Pennon business to compete independently in any of the markets affected by the transaction.
Pennon, BWHUK and Bristol Water must also ensure that:
- the Bristol Water business is carried on separately from the Pennon business and the Bristol Water business’s separate sales or brand identity is maintained;
- the Bristol Water business and the Pennon business are maintained as a going concern and sufficient resources are made available for the development of the Bristol Water business and the Pennon business, on the basis of their respective pre-merger business plans;
- except in the ordinary course of business, no substantive changes are made to the organisational structure of, or the management responsibilities within, the Bristol Water business or the Pennon business;
- the nature, description, range and quality of goods and/or services supplied in the UK by each of the two businesses are maintained and preserved.
The companies must also ensure that all of the assets of the Bristol Water business and the Pennon business are maintained and preserved, including facilities and goodwill, and none of the assets of the Bristol Water business or the Pennon business are disposed of.
Other requirements include:
- there is no integration of the information technology of the Bristol Water or Pennon businesses, and the software and hardware platforms of the Bristol Water business remain essentially unchanged, except for routine changes and maintenance;
- the customer and supplier lists of the two businesses are operated and updated separately and any negotiations with any existing or potential customers and suppliers in relation to the Bristol Water business will be carried out by the Bristol Water business alone
- the Pennon business will not negotiate on behalf of the Bristol Water business (and vice versa) or enter into any joint agreements with the Bristol Water business (and vice versa);
- no changes are made to key staff of the Bristol Water business or Pennon business;
- no key staff are transferred between the Bristol Water business and the Pennon business;
- no business secrets, know-how, commercially-sensitive information, intellectual property or any other information of a confidential or proprietary nature relating to either of the two businesses are directly or indirectly passed from the Bristol Water business to the Pennon business or vice versa
The CMA will announce the formal commencement of its phase 1 investigation at a later date.
Written representations about any competition or public interest concerns should be sent to James McGarrachan at the Competition and Markets Authority -
Click here to read the initial enforcement order in full.
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