Kellen Acquisitions Ltd / East Surrey Holdings plc

OFT closed case: Anticipated acquisition by Kellen Acquisitions Limited (a private company owned by funds managed by Terra Firma Investments (GP) 2 Limited) of East Surrey Holdings plc.

Affected market: Energy

No. ME/1725/05

The OFT’s decision on reference under section 33(1) given on 16 June 2005. Full text of decision published 17June 2005.


Kellen Acquisitions Ltd (Kellen) is a private company incorporated in England & Wales for the purposes of acquiring ESH. Kellen is owned by funds managed by Terra Firma Investments 2 (GP) Ltd, a company ultimately controlled by Terra Firma Capital Partners Holdings Ltd (Terra Firma), a private equity firm. At time of notification, none of the companies in Terra Firma’s existing investment portfolio carry on a business activity in the electricity, gas or water industry (see [note 1]).

East Surrey Holdings plc (ESH) is a public limited company with three main operations through various subsidiaries: the conveyance and supply of gas in the Greater Belfast area; gas connections and transportation in Great Britain; and the supply of drinking water to certain London boroughs and parts of Kent and Sussex. 


Kellen will acquire the whole of the share capital of ESH. The 40-working day administrative timetable expires on 11 July 2005. 


As a result of this transaction Kellen and ESH will cease to be distinct. For the financial year ended 31 March 2004, the UK turnover of ESH was around £73 million. The UK turnover of ESH thus exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 is satisfied. Arrangements are in progress or contemplation which, if carried into effect, will result in the creation of a relevant merger situation. 

Sutton and East Surrey Water plc, an ESH subsidiary, is a water enterprise for the purposes of the Water Industry Act 1991 (WIA). A mandatory reference under section 32 of the WIA is not triggered as only one water enterprise is involved in this transaction. 


Since none of the activities of the Terra Firma funds give rise to any overlap between the business activities of ESH, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.


This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.


1. The recently completed acquisition by Terra Firma of the entire share capital of British Gas Connections Limited has not been taken into account in this assessment and will be assessed separately by the OFT.

Published 15 June 2005