Veolia has offered to sell the Suez business in the UK to assuage the Competition and Markets Authority’s (CMA) concerns that the merger of the waste management firms would mean a loss of competitiveness in the market.
The companies had agreed on terms for a £11.2 billion merger in May 2021, following protracted negotiations.
But the CMA launched an inquiry into the deal in October 2021 and it was referred for an in-depth phase 2 investigation, led by an independent inquiry group, in December 2021 and announced last month that one of the businesses should be divested to avoid a loss of competition in waste services. Its final decision was due on 17 July.
Veolia, which has 220,000 employees in more than 50 countries and revenues of about €38 billion, originally rejected the CMA’s view that a merger would reduce competition, but the company informed the watchdog on Monday (13 June) that it now intends to sell all of Suez's waste activities in the country. It will now hive off the UK waste unit it bought from Suez and its own UK industrial water and wastewater business as a “significant divestment remedy” that would solve issues raised by the CMA.
Both waste firms run multiple waste management contracts with local councils, from household waste collections to landfill and composting operations.
In its reply to the CMA, Veolia said: “In order to terminate this long period of waiting, but above all to be able to fully focus on the creation of the world champion, in the United Kingdom as elsewhere in the world, Veolia has informed the CMA on Monday of its intention to sell all of Suez's waste activities in the country.
“This drastic decision is an effective response to the intransigence of the CMA. Veolia strongly disagrees with their analysis of the concerned markets and deplores the lack of shared understanding of the issues related to our sectors of activity.
“Indeed, at a time when ecological transformation is ardently demanded by populations and placed at the heart of the agenda of public authorities as well as economic players throughout the world, the constitution of a major global champion able to provide a global solution for the environment on the five continents has never seemed so necessary. In the UK, as elsewhere in the world, Veolia is convinced that the addition and complementarity of the teams, their know-how and expertise are the best way to respond effectively and rapidly to the needs of its clients, territories and industries, to tackle major challenges of climate change, energy security, loss of biodiversity and shortages of materials.
“The first positive results of this merger, in terms of people, operations and finances, confirm the relevance of the project led by Veolia. It added that the merger had already proved itself useful, wIth the addition of new skills, new technologies and new geographies and could accelerate the implementation of the Impact 2023 strategic programme, strengthening Veolia's international footprint.”
It added: “We regret that the CMA's analysis will not allow the group to deploy the full potential of the ecological transformation in the UK, but it does not reduce our commitment to this region. It does not affect the overall scope of Veolia's project, whose capacity to create value remains intact.”
Veolia said the disposals would “free up significant cash flow to finance new developments”, particularly in the energy sector, enabling the company to return to a portfolio of activities.”