Anticipated merger between Co-operative Financial Services Limited and Britannia Building Society

Affected market: Financial services and building societies

No. ME/4008-09

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, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 18 February 2009. Full text of decision published 25 February 2009.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

The Co-operative Bank plc  (Co-op Bank) is a wholly-owned subsidiary of Co-operative Financial Services Limited (CFS). CFS is itself a subsidiary of the Co-operative Group Limited (CGL), which is active in a wide range of activities including grocery retailing, pharmacies, and funeral services. Other CFS subsidiaries include the Co-operative Insurance Society Limited and CIS Unit Managers Limited (which trades as The Co-operative Investments). The Co-op Bank provides personal customers with high street and internet banking, personal current accounts (PCAs), mortgages, credit cards and loans. The Co-op Bank also provides business banking services. Other CFS subsidiaries offer a variety of insurance products, unit trusts, investment bonds and pensions. The Co-op Bank has approximately 90 branches throughout the UK.

Britannia Building Society (Britannia) is a mutual building society incorporated under the Building Societies Act 1986. It provides financial services to personal customers including mortgages, personal savings accounts and insurance. Britannia also offers specialised services including commercial mortgage lending, lending via intermediaries, third party mortgage servicing and offshore savings. Britannia is the UK's second largest building society, and has 248 branches. Britannia's UK turnover in 2007 was £2,188.3 million.

TRANSACTION

CFS and Britannia agreed to merge and the proposed transaction will take effect by way of a transfer of business by Britannia to Co-op Bank pursuant to section 97 of the Building Societies Act 1986 as amended by an order made under section 3 of the Building Societies (Funding) and Mutual Societies (Transfers) Act 2007. The offer was publicly announced on 21 January 2009 and is scheduled to complete on 31 July 2009. The transfer is conditional on approval by Britannia's members.
 
The parties notified the transaction to the Office of Fair Trading (OFT) by means of a Merger Notice under section 96 of the Enterprise Act 2002 on 21 January 2009. The statutory deadline for the OFT to decide whether to refer the merger to the Competition Commission (CC) expires on 18 February 2009.

JURISDICTION

As a result of this transaction CFS and Britannia will cease to be distinct. Both parties achieve more than two-thirds of their aggregate Community-wide turnover within the UK. Therefore, the merger does not have a Community dimension under the EC Merger Regulation. The UK turnover of Britannia exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

The OFT received comments and views about the merger from a number of third parties.
 
No third parties expressed any concerns about the transaction to the OFT.

ASSESSMENT

CFS and Britannia overlap in the supply of a range of financial services to personal customers in the UK including savings accounts, mortgages, loans, long-term investments and insurance. They also overlap in the supply of commercial mortgages and offshore savings services [ ] in the UK.

For the purposes of this assessment, the OFT examined all these financial products on a UK-wide basis. In addition, the OFT examined information provided by the parties on local and regional areas in which the parties overlap.

Based on the evidence available to it, the OFT considers that no competition concerns will arise on any of these frames of reference. At the national and regional levels, the parties have a small combined market share of supply in relation to each of the product segments with minimal or small increments in all segments. At a local level, the OFT concluded that there are no locations in which there is a reduction of fascia to less than four, and only one from five to four. Based on the local facts and the existence of a number of alternatives, no competition concerns are considered to arise in any such local areas.
 
Consequently, the OFT does not believe that it is or may be the case that the merger 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 Act.

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