RNS

3 May 2024

Pennon Group plc

Sutton and East Surrey Water - Acquisition update

Today, the Competition and Markets Authority ("CMA") published the outcome of its Phase 1 merger review following Pennon's acquisition of Sumisho Osaka Gas Water UK Limited ("SOGWUK"), the holding company of Sutton and East Surrey Water ("SES Water") and certain other ancillary businesses, which was announced on 10 January 2024.

During this phase of its review, the CMA has been considering whether there is a realistic prospect that the acquisition of SES Water by Pennon is likely to prejudice Ofwat's ability to make comparisons between water companies, such that a referral for a Phase 2 review may be warranted. Throughout this process we have worked transparently and collaboratively with both Ofwat and the CMA to support and expedite their review and will continue to do so. In the interests of procedural efficiency, and based on its experience of previous merger reviews, Pennon has accepted that the threshold for referral may be met in this case. The CMA has accordingly confirmed today that it will refer the transaction for a Phase 2 review unless acceptable undertakings in lieu of a reference are offered. 

Pennon intends to offer appropriate undertakings to the CMA by 13 May 2024. As with the Group's acquisition of Bristol Water, the proposed undertakings will ensure that the acquisition does not prejudice Ofwat's ability to make comparisons between water companies when carrying out its statutory functions as a regulator, and ensure that the benefits of the acquisition are shared among the Group's stakeholders.

In line with the CMA's guidance, the CMA will then consider whether to provisionally accept the proposed undertakings. Should those undertakings be provisionally accepted, in line with standard procedure, the CMA would then launch a consultation on those proposals.

Susan Davy, Group CEO, commented:

"We are encouraged by this positive and expedient step forward in the acquisition process. 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."

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Background

Pennon's acquisition of 100% of the issued capital of Sumisho Osaka Gas Water UK Limited, the holding company of SES Water completed on 10 January 2024 and, in line with standard procedure, is subject to CMA review under the Water Industry Act 1991.

About Pennon

Pennon Group plc is a FTSE 250 listed UK focused environmental infrastructure group, comprising South West Water (incorporating Bristol Water and Bournemouth Water), Pennon Water Services, Pennon Power, a stake in Water2Business and now including SES Water and a number of other ancillary businesses which make up the Acquisition.

South West Water is one of the leading businesses in the UK water sector, providing water and wastewater services to a population of c.3.5 million across nine counties in the South West.  

The Company provides over 870 million litres of safe, clean drinking water every day, in addition to the management of c.23,000km of sewer network used to transfer water and surface water run-off to one of our 655 wastewater treatment works where it is treated, tested and safely returned to the environment.

Pennon Water Services is an 80:20 venture with South Staffordshire Plc, and provides retail water and wastewater and value-added services to around 160,000 non-household customer accounts across England and Scotland, and is focused on delivering long-term, sustainable growth. Water2Business is a 30:70 venture with Wessex Water, providing retail water and wastewater services to over 180,000 non-household accounts across England and Scotland.

Further information on Pennon can also be found on the Group's website, www.pennon-group.co.uk