Anticipated acquisition by HSBC Holdings plc of Marks & Spencer Retail Financial Services Holdings Limited

Affected market: Financial services

No. ME/1244/04

Please note that the full text of the decision can be downloaded by using the link on the right . What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

Please note that square brackets indicate information excised, or exact figures replaced by a range, at the parties' request

The OFT's decision on reference under section 33 (1) given on 12 October 2004

PARTIES

HSBC Holdings plc (HSBC) is one of the largest banking and financial services organisations in the world. It provides a comprehensive range of financial services, such as personal finance, commercial banking, corporate and investment banking and private banking. In March 2003, HSBC acquired HFC Bank Limited which specialises in consumer finance.

Marks & Spencer Retail Financial Services Holdings Limited (M&S Money) is a wholly-owned subsidiary of the Marks & Spencer Group plc, one of the largest retailers of clothes, food and home products in the UK. M&S Money provides a wide range of financial products such as store cards, credit cards, personal loans, various unit trusts, the personal reserve, life assurance, pension products and other insurance products, guaranteed capital bond and mini-cash ISA. M&S Money trades as M&S Financial Services and is branded as M&S Money.

TRANSACTION

HSBC will acquire 100 per cent of M&S Money and its subsidiaries as follows: Marks & Spencer Financial Services plc, Marks & Spencer Savings and Investments Ltd, Marks & Spencer Unit Trust Management Ltd and Marks & Spencer Life Assurance Ltd.  HSBC will become the external finance provider for various financial products distributed through M&S Money. Under the terms of the share purchase agreement, HSBC will pay an up-front consideration of £275 million plus net asset value at completion. Additionally, it will pay approximately £ [ ] million for the M&S Money life assurance business.

The transaction was announced on 12 July 2004.  The 40-day administrative deadline expires on 11 October 2004. 

JURISDICTION

HSBC and M&S Money will cease to be distinct as a result of these arrangements.  The merger meets the turnover test in section 23 of the Enterprise Act 2002 (the Act) as M&S Money's UK turnover is greater than £70 million.  The notified arrangements, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The parties overlap primarily in the supply of store cards and credit cards and to a lesser extent in a range of other financial products. As the parties' combined share of supply in each of these other financial products will be low (under ten per cent), these other products have not been considered in detail above.

Pre-merger, M&S Money has only been active in supplying store card and credit card services in-house and hence does not and has not competed directly with HSBC.  Post-merger, HSBC will be the second largest provider of store card services to retailers, with around [15-25] per cent of store cards based on volume, some way behind the leading supplier, GECF. In the upstream supply of credit card services to retailers, there are a number of potential suppliers.  Although barriers to entry would appear high given the long duration of contracts and the high degree of inertia, it is likely that retailers enjoy some degree of buyer power.

At the downstream level, the increments resulting from the merger are low and the supply of both store cards and credit cards is highly fragmented. In recent years there has also been a reasonably high incidence of entry in the credit cards segment with new players winning share from the traditional banks.

Finally, as noted above, third parties raised no concerns about any aspect of the merger.

Consequently, the OFT does not believe that it is or may be the case that the creation of this merger situation may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

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

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