CMA partially clears Pennon’s Bristol Water merger

At the start of June, Pennon announced it had acquired 100% of an issued share capital of Bristol Water from its indirect shareholders. The Exeter-based water utility company made the purchase for an equity value of £425m, and an enterprise value of £8.1bn including assumed.

The watchdog, which launched its investigation on 15 June 2021, decided not to refer to the merger under section 22 of the 2002 Enterprise Act. The act says the CMA must reference a case if it believes a situation has been created that has resulted, or may be expected to result, in a “substantial lessening of competition” within any market or markets in the UK for goods or services.

The CMA is, however, still considering whether it should refer to the merger under section 32 of the 1991 Water industry Act, which focuses on arrangements that are in progress which, if carried into effect, will result in a merger of any two or more water enterprises.

In October, the watchdog said it would look into the deal in order to see if it would prejudice Ofwat’s ability to make comparisons between water enterprises.

Following the CMA’s announcement, made at 11am this morning (5 November), Pennon’s share price dipped from 1,207 to 1,206. Credit Strategy has reached out to Pennon for a comment.