Veolia to sell ‘substantial parts’ of SUEZ under CMA ruling

The Competitions and Markets Authority (CMA) has today (25 August) ordered Veolia to sell three businesses following an in-depth merger investigation, which raised competition concerns in a number of markets.

Veolia truckThe CMA has concluded that Veolia must sell substantial parts of the merged business:

  • SUEZ’s UK waste management services businesses;
  • SUEZ’s UK industrial water operation and maintenance services business; and
  • Veolia’s European mobile water services business.

These businesses, the CMA says, make up almost all of the overlap between the two companies’ competing operations in the UK.

In May, the CMA released its provisional findings of the Phase 2 inquiry, recommending the sale of the UK SUEZ waste business. The merging companies agreed to sell the UK business, announcing a £2 billion deal with Australian asset management company Macquarie in August.

The CMA will determine the conditions of this sale, as well as the sales of two water services businesses. The body will also need to approve the purchasers of each business before the completion of each sale.

John Scanlon, Chief Executive Officer for SUEZ Recycling and Recovery UK, said: “The publication of the CMA’s final decision draws a line under this chapter of our company’s history.

“I’d like to thank the teams at the CMA and Veolia, and of course my SUEZ colleagues, for their hard work and diligence during the investigation.

“With our new ownership set to be confirmed before the year is out, this will come at a pivotal moment for our sector, and I look forward to playing our part in the UK’s transition to a more resource-efficient, circular economy, delivering on our commitment to People and Planet.”

“Competition concerns in five waste and two water markets”

Stuart McIntosh, Chair of the CMA inquiry group, said: “Local authority budgets are already under strain, and this deal is likely to lead to them paying more and receiving a lower-quality service. The negative impact would have ultimately 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 appropriate buyers are found so that businesses, councils – and ultimately taxpayers – will not lose out.

“The CMA’s final report, published today, confirms its provisional findings issued in May. It rules that the merger would lead to competition concerns in five waste markets and two water treatment markets.

“In each of these markets, the merging businesses currently compete closely and would face limited competition after the merger. The CMA found that this would be likely to result in higher cost or lower quality services for councils, with knock-on effects for taxpayers, as well as businesses across the UK.”

History of the merger

Veolia first announced its intention to acquire SUEZ in August 2020, with a formal merger agreement signed by April 2021. Veolia agreed to buy the 70.1 per cent of SUEZ it didn’t already own for €20.50 (£17.26) per share.

The CMA launched an investigation into the deal in October 2021. After its referral for an in-depth Phase 2 review in December, the CMA stated that the merger could lead to higher prices and lower quality services across ‘a range of waste management activities in the UK.’

Both global players in waste and water management, Veolia and SUEZ generated approximately a respective £2bn and £1bn in the UK in 2020 – around 10 and seven per cent of their annual global revenues.

The CMA’s investigation heard from a number of councils and customers who expressed concerns about the potential impact of the merger on the UK market – the two companies supply waste management services to a number of local authorities, and water/wastewater services to industrial customers. According to the CMA, taxpayers and businesses would have been ‘left to cover any increase in cost’ resulting from a lessening of competition.

In a statement, Veolia stated that it ‘strongly disagreed’ with the CMA’s analysis of the concerned markets and ‘deplores the lack of shared understanding of the issues related to our sectors of activity’.

The CMA’s final report comes just under six weeks later than its original release date, with the body being granted an eight-week extension due to the ‘scope and complexity of the inquiry’.

This deal has been reviewed by a number of competition authorities across the world. The European Commission approved the deal in December, conditional on total compliance with a commitments package that sought to eliminate competition concerns. Major divestments were also required in Australia.

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