The UK’s competition watchdog on Friday warned Pennon Group PLC that its planned acquisition of Sumisho Osaka Gas Water UK Ltd could face a deeper investigation should ‘acceptable’ undertakings not be made.

On Friday, the Competition & Markets Authority published the findings of its Phase 1 merger review following Pennon’s acquisition of Sumisho, the holding company of Sutton and East Surrey Water, which was announced in January.

The CMA said it had decided that the merger has prejudiced or will prejudice Ofwat‘s ability to make comparisons between water enterprises.

As a result, the CMA said the merger would be referred for a phase 2 investigation unless Pennon offers acceptable undertakings to address the adverse impact of the merger on Ofwat’s system of comparative regulation.

The Water Services Regulation Authority, or Ofwat, is the body responsible for economic regulation of the privatised water and sewerage industry in England and Wales.

Pennon said it intends to offer appropriate undertakings to the CMA by May 13. It said these 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.

Pennon Chief Executive Susan Davy said: ‘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.’

Davy she was ‘confident that we will be able to offer a compelling package of undertakings that will fully address the CMA and Ofwat’s concerns.’

Shares in Pennon rose 0.4% to 691.50 pence each in London on Friday morning.

Copyright 2024 Alliance News Ltd. All Rights Reserved.