The Competition and Markets Authority (CMA) has today unconditionally cleared the acquisition of Bournemouth Water by Pennon and the subsequent merger of Bournemouth Water with South West Water.

The decision follows on from the CMA’s provisional findings published on 30 September 2015.

In a statement , Pennon Group, owners of both companies, said:

“ This efficient, combined water business will deliver tangible long-term benefits to both customers and shareholders as the water industry works towards market liberalisation in 2017. Based on our analysis, there is a 94% probability that the combined company will set the efficiency frontier at PR19.”

According to Pennon, the combined water business will achieve efficiencies and service improvements through:

• merging wholesale and retail operations
• combining central support functions
• creating common systems and processes
• driving supply chain efficiencies
• delivering even better customer service
• working to bring together best practice from both businesses

Pennon will retain the Bournemouth Water brand and will continue separate regulatory reporting for Bournemouth Water until at least 2020 to aid Ofwat with comparisons between companies.

South West Water aims to merge the two businesses by the end of 2015/16 and in doing so will adopt a new licence for the combined entity. The operational integration of the two businesses will be complete by the end of 2016/17.

Chris Loughlin, Executive Director of Pennon & Chief Executive of South West Water, said:

“We are pleased to note the CMA has cleared the Bournemouth Water acquisition. We will now set about merging Bournemouth Water with South West Water to deliver service improvements and efficiencies for customers and shareholders.”

In June 2015, the completed acquisition by Pennon Group plc  was referred for an automatic in-depth investigation. The CMA had to assess whether the merger could be expected to prejudice the ability of Ofwat to make comparisons between different water companies for the purpose of its regulatory functions.

In its final report published today, the CMA has concluded that the merger is not likely to prejudice the Water Services Regulation Authority’s (Ofwat) ability to compare water companies’ performance and set price controls.

During the inquiry it examined how the merger might affect Ofwat’s ability to make comparisons in each of the following areas: setting wholesale price controls; setting retail price controls; setting wholesale quality of service performance targets; improving retail quality of service; and spreading best practice.

Click here to download the CMA’s final report