PROPOSED ACQUISITION BY VIVENDI WATER UK - FIRST AQUA (JVCO)

28 Apr 2003 04:15 PM

Melanie Johnson today announced that she has accepted undertakings from Vivendi Water UK and Royal Bank of Scotland in relation to the proposed acquisition by Vivendi of an interest in First Aqua. This decision is in accordance with the advice of the Office of Fair Trading.

The undertakings allow Vivendi Water to hold an interest in First Aqua, whilst addressing the Competition Commission's concerns that the acquisition originally proposed may be expected to operate against the public interest by prejudicing the ability of the Director General of Water Services to make comparisons between different water enterprises. In particular, the undertakings require Vivendi to limit its voting shares in Southern Water Investments Limited to no more than 25%, and restrict the number of Directors it can appoint to the Boards of the companies in the new corporate structure. There are also restrictions on what Vivendi can do prior to the completion of the transfer. RBS have undertaken, upon taking on a 75% share in Southern Water Investments Limited, to appoint at least one Director with substantial relevant experience of management of a water or sewerage undertaker.

The undertakings have already been signed.

Notes to Editors:

1. The Competition Commission report into the proposed merger of Vivendi Water UK plc and First Aqua (JVCo) Limited was published on 8 November 2002 (Cm 5681). The decision to seek further advice was announced the same day (see DTI News Release P/2002/692). Melanie Johnson accepted the advice of the Director General of Fair Trading on 24 March 2003, and asked him to obtain undertakings the same day (see DTI News Release P/2003/183).

2. The proposed merger comes within the scope of the EC Merger Regulation. The European Commission, which cleared the case under the ECMR on 23 August 2002, recognised the legitimate interest of the UK in examining the merger's implications for the regulatory regime under the Water Industry Act. Section 34(3)(a) of that Act provides that the CC, in considering whether a water merger may be expected to operate against the public interest, 'shall have regard to the desirability of giving effect to the principle that the [regulator's] ability, in carrying out his functions., to make comparisons between different water enterprises should not be prejudiced'. This ability underpins the regime of comparative competition in the water industry, in which the level of product market competition is very low.

3. For non-media enquiries, texts of the undertakings are available from Trevor Kenney, Consumer and Competition Policy Directorate, DTI (telephone 020 7215 5759, fax 020 7215 6565, e-mail
Trevor.Kenney@dti.gsi.gov.uk).

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