CMA set for deeper probe of Pennon's SES acquisition

Pennon Group worked to assure the market that its acquisition of Sutton and East Surrey Water (SES Water) would avoid a deeper competition probe on Friday, telling shareholders that it planned to offer “appropriate undertakings” to regulators.

The Competition and Markets Authority (CMA), having conducted a phase one investigation, announced on Friday morning that it would refer the acquisition to a phase two review unless acceptable undertakings were offered.

Such a review would assess whether the acquisition could hinder Ofwat's ability to compare water companies for effective regulation.

Pennon said it recognised that the acquisition could meet the threshold for referral, and so it planned to offer undertakings to the CMA by 13 May.

It said such undertakings would be similar to those it offered in its acquisition of Bristol Water, ensuring that the deal would not impact Ofwat's regulatory functions, with stakeholders still benefiting from the acquisition.

If the CMA provisionally accepts the undertakings, it would launch a consultation following standard procedure.

“We are encouraged by this positive and expedient step forward in the acquisition process,” said group chief executive officer Susan Davy.

“It is important to us that this deal receives the appropriate level of scrutiny so that all of our stakeholders feel reassured of the benefits of the acquisition and have trust in the outcome.

“While the undertakings have not yet been agreed, we have been through this process before with our acquisition of Bristol Water and are confident that we will be able to offer a compelling package of undertakings that will fully address the CMA and Ofwat's concerns, and ensure that the benefits of the acquisition for all customers and stakeholders are delivered.”

At 0826 BST, shares in Pennon Group were up 0.29% at 691p.

Reporting by Josh White for Sharecast.com.