Anticipated acquisition by Collins Stewart Tullett plc of FPG Holdings Limited

Affected market: Financial broking

No. ME/1263/04

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, background, 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 7 October 2004

PARTIES

Collins Stewart Tullett plc. (CST) is a global financial services group. Through its subsidiary Collins Stewart Limited, its activities comprise institutional and private client stock broking, market-making, corporate finance, fund management and the supply of online financial information. CST owns Tullett Liberty (Tullett), a fully diversified inter-dealer broker (IDB) active in the broking of cash equities, credit derivatives, energy, equities, fixed-income securities, global money and capital markets. CST carries out its wholesale pricing data sales activities through Tullett Liberty Financial Limited, a wholly owned subsidiary of Tullett. The turnover of CST in the UK for the year ended 31 December 2003 was £282.9 million.

Fulton Prebon Group Holdings Ltd. (Prebon) provides brokerage services for financial and commercial institutions worldwide in the commodities, derivatives, energy and emerging markets, fixed-income securities, foreign exchange and money markets. Prebon also carries out wholesale pricing data sales activities via Target Data Services (Bermuda) Limited. The turnover of Prebon in the UK for the year ended 31 December 2003 was £ [ ] million.

TRANSACTION

CST will acquire a 100 per cent shareholding in Prebon. The consideration will comprise a mixture of approximately £51.6 million cash and new ordinary shares in CST with an approximate value of £18 million.

The transaction was announced on 26 May 2004. On 25 August 2004 the parties notified the proposed acquisition to the OFT by way of a merger notice. The statutory deadline is 7 October 2004.

JURISDICTION

CST and Prebon 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 Prebon'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 in the broking of derivatives, energy, fixed income securities, foreign exchange and money markets. These activities can be segmented between electronic broking (in which the parties are not active) and voice broking. For the purpose of analysing the competition effects of this case the brokerage of each financial instrument is considered separately at EU level.

Regarding financial broking, the parties have the greatest presence in voice broking of fixed-income securities ([20-30] per cent) and money markets ([35-45] per cent). The parties are not active in electronic broking. However, these figures overstate the parties' position since other channels for trading are available to dealers. For example, within the money markets segment, [80-90] per cent of trading is carried out through the direct channel. In addition, there will remain a number of IDB competitors, of which at least three or four have a material market presence. Barriers are relatively low and there is evidence that buyers do exert a restraining influence.

Regarding the wholesale supply of pricing data, no third party raised concerns and the other evidence suggests the transaction does not raise any competition concerns.

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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