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Currently the Competition and Markets Authority (CMA) has a duty to refer mergers involving water companies for phase 2 investigation if it believes that both of the target and acquiring water companies have a UK turnover of more than 拢10 million. The CMA believes that the turnover thresholds are met in this case.

The transaction, which has already been completed, involves the acquisition by Pennon Group plc (the owner of South West Water Limited) of Bournemouth Water Investments Limited (which operates Bournemouth Water).

The CMA will investigate whether the merger has or may be expected to prejudice the ability of the Water Services Regulation Authority, Ofwat, to make comparisons between different water companies for the purpose of its regulatory functions such as price regulation. The CMA is expected to report by 20 November 2015.

Notes for editors

1. The Reference Test 鈥� under the Water Industry Act 1991 (as amended by the Enterprise Act 2002) the CMA has a duty to make an automatic reference to a phase 2 investigation if it believes that it is or may be the case that a merger of any 2 or more water enterprises has taken place and (i) that the value of the turnover of the target water company exceeds 拢10 million; and (ii) that the acquiring firm already owns water companies that each has turnover exceeding 拢10 million.
2. The Water Act 2014 makes changes to the regime which will remove the CMA鈥檚 duty to automatically refer water mergers for phase 2 investigation. Once the new regime commences, water mergers will therefore include a phase 1 merger investigation to assess whether any concerns that the merger could prejudice Ofwat鈥檚 ability to carry out its regulatory functions merit a more in-depth investigation. The relevant provisions are not yet in force and so this merger is subject to a mandatory reference.
3. All the CMA鈥檚 functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA鈥檚 panel members. The appointed inquiry group are the decision makers on phase 2 inquiries.
4. The CMA鈥檚 panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
5. The full text of this decision will be placed on the case page as soon as is reasonably practicable.
6. Enquiries should be directed to Siobhan Allen ([email protected], 020 3738 6460).
7. For information on the CMA see our homepage, or follow us on Twitter , and . Sign up to our email alerts to receive updates on merger cases.