The Competition and Markets Authority (CMA) today (August 25) ordered Veolia to sell three businesses after an in-depth investigation into the company’s takeover of Suez concluded that the merger raised sustainability concerns. compete in a number of markets.
The CMA concluded that Veolia should sell substantial parts of the merged business: Suez’s waste management services business in the UK, Suez’s industrial water operation and maintenance services business in UK and Veolia’s European mobile water services business. The CMA says these businesses account for almost all of the overlap between the competing businesses of Veolia and Suez in the UK.
In response to the interim findings of the Phase 2 investigation, Veolia said it would sell Suez’s waste management business in the UK and announced the signing of a unilateral sale agreement whereby the Australian company Macquarie Asset Management irrevocably undertakes to acquire 100% of the capital of Suez Recycling and Recovery UK Group, bringing together Suez’s waste activities in the United Kingdom. Proceeds from the sale will amount to approximately 2.4 billion euros.
The CMA will now determine the divestiture terms as well as the divestments of the two water utility companies.
Both Veolia and Suez are global players in waste and water management. In 2020, the companies generated around £2 billion and £1 billion respectively in the UK, around 10% and 7% of their annual global revenue.
Veolia and Suez are active across the entire waste management supply chain. They collect household and business waste, sort it for recycling and composting, and dispose of the remaining waste, some of which is incinerated to generate electricity. Many local authorities in the UK rely heavily on Veolia or Suez to meet their waste management needs. The companies also provide water and wastewater management services to industrial customers.
Throughout the investigation, CMA heard from a number of counsel and customers who were concerned about the potential impact of the merger on the cost and quality of the services they receive. In the end, taxpayers and businesses should have covered any increased costs.
Stuart McIntosh, chair of the CMA’s investigative group, said: “Local government budgets are already under pressure, and this agreement risks leading them to pay more and receive a lower quality service. The negative impact would ultimately have fallen on taxpayers at a time when they are feeling the pressure of the cost of living crisis.
“Given our concerns about the merger, we have concluded that Veolia must sell most of the operations it took over in the UK when it acquired Suez. We will now work with Veolia to ensure that buyers appropriate are found so that businesses, councils – and ultimately taxpayers – do not lose out.”
The CMA’s final report, released today, confirms its interim findings released in May. It considers that the merger would cause competition problems in five waste markets and two water treatment markets. In each of these markets, the merging companies are currently in close competition and would face limited competition post-merger. The CMA found this would likely lead to higher costs or lower quality services for advice, with ripple effects for taxpayers, as well as businesses across the UK.
The CMA launched an investigation into the deal between Veolia and Suez in October 2021. The transaction was referred for an in-depth phase 2 review, which is being conducted by an independent investigation group, in December 2021.
This agreement has been reviewed by a number of competition authorities around the world. Significant divestments were also required in the EU and Australia.
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