Completed acquisition by Albemarle & Bond Holdings Limited of Herbert Brown & Son Limited

Affected market: Pawnbroking

No. ME/3198/07

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 22(1) given on 19 September 2007. Full text of decision published 3 October 2007.

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

PARTIES

Albemarle and Bond Holdings plc (A&B) is a company listed on the Alternative Investment Market. Its core business is the provision of consumer credit - primarily by means of pawnbroking and related services - but also through pay day advances, loans and the cashing of cheques. A&B is also a retailer of new and second hand jewellery.

Herbert Brown & Son Ltd (Herbert Brown) is a private limited company whose activities (with the exception of loans) overlap with those of A&B - but are more heavily weighted towards jewellery retail. Herbert Brown's turnover during the year ended 31 March 2006 was £11.7m.

TRANSACTION

A&B's acquisition of the entire issued share capital of Herbert Brown was completed on 17 July 2007. The statutory date by which the OFT must reach a decision on reference is therefore 16 November. The parties notified the transaction to the OFT on 27 July 2007. The administrative target date for a decision is 21 September 2007.

JURISDICTION

As a result of this transaction A&B and Herbert Brown have ceased to be distinct. The parties' supply of pawnbroking services brings about combined shares of over 25 per cent in several localities which constitute a substantial part of the UK. Consequently the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

THIRD PARTY VIEWS

Third party comment has been discussed in the body of the analysis above. No third party raised any concern in relation to the merger.

ASSESSMENT

The parties overlap in the retail of jewellery and in the supply of several types of non-mainstream consumer credit. Neither of the parties is a significant player in jewellery retail: a segment in which considerable competitive constraint is posed at all relevant local levels.

For the purposes of this analysis, the two relevant non-mainstream consumer credit segments are (a) traditional pawnbroking and sale and buy-back services and (b) pay day advances and cheque cashing.

There are seven towns and cities in the UK in which A&B and Herbert Brown both operate: Huddersfield, Sunderland, Wakefield, Doncaster, Manchester, Leeds and Newcastle-upon-Tyne.

Without prejudice to the geographic scope being wider, a cautious approach has been taken by examining the impact of the merger within an area delimited by a one mile radius around the parties' shops.

On this very narrow geographic basis, post-merger there remain four or more fascia competing in the traditional pawnbroking and sale and buy-back segment in all the relevant locations - with the exception of Huddersfield, where the number is reduced to three.

In relation to Huddersfield, the OFT does not consider, not least on the basis of low entry barriers, that a reduction to three competitors supplying pawnbroking services at the one mile radius results in any substantial lessening of competition.

As regards the segment comprising the provision of pay day advances and cheque cashing services, the available evidence indicates that, post-merger, there remain at least six competing fascia on the basis of one mile radii in all of the relevant locations.

The opening by both existing chains and small independents of fourteen new shops in the period March to July 2007 is evidence of low barriers to entry and expansion in this retail sector.

Consequently, 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.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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