Oil Concerns Cause CMA to Refer ICAP Deal with Tullett Prebon to Phase 2

UK's CMA refers Tullett Prebon deal with ICAP to phase 2 over oil product.

According to two respective regulatory filings just made in parallel with the London Stock Exchange (LSE) by ICAP and Tullett Prebon PLC, regarding their proposed transaction related to ICAP’s global hybrid voice broking and information business that Tullett Prebon will acquire, the status of the transaction has been referred for a phase 2 investigation by the Competition and Markets Authority (CMA) in the United Kingdom.

Finance Magnates has reported on many stages of this transaction which aims to become a significant addition to Tullett Prebon’s operations as it intends to acquire the hybrid voice broker and information business from ICAP, which is subject to regulatory approvals including from the CMA.

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19 of 20 products cleared

The news arises from the CMA’s announcement today that it is deepening its investigation into the proposed deal, while it noted that from the nearly 20 overlapping product categories, which include Spot FX, Equity Derivatives, Interest Rate Swaps, and other related asset classes, only one product – oil – was found to be of potential concern for the CMA with regard to competition.

 

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The CMA’s concerns following its phase 1 review are limited to the overlap in voice/hybrid broking of oil products where approximately £228 million in annual industry-wide revenues in Europe, the Middle East and Africa are generated

 

ICAP notes that it is confident that clearance will be obtained from the CMA and together with Tullett Prebon it is in the process of obtaining the necessary remaining regulatory and competition approvals from relevant authorities, as explained it its filing. Tullett Prebon added in its update that it intends to explore how best to satisfy the CMA’s concerns, while it considers that the acquisition is on track to close in 2016.

Deal considered on track to close

Commenting in an official statement, Andrea Coscelli, CMA Executive Director of Markets and Mergers, and a decision-maker in the phase 1 investigation, said regarding the update: “In the context of declining voice/hybrid broker revenues over the last few years as a result of regulatory changes, the CMA did not find significant competition concerns in relation to 19 of the 20 overlap product categories for voice/hybrid broking services.”

Mrs. Coscelli added: “ The CMA’s concerns following its phase 1 review are limited to the overlap in voice/hybrid broking of oil products where approximately £228 million in annual industry-wide revenues in Europe, the Middle East and Africa are generated. In this area, the parties have a strong market position, there is more limited competition from brokers and other electronic platforms, and the CMA has heard a number of third party concerns. Given the potential for this merger to adversely affect customers for voice/hybrid broking of oil products, we think the acquisition warrants an in-depth investigation unless Tullett and ICAP can offer suitable undertakings to address the CMA’s concerns.”

In terms of what’s next for ICAP if the deal closes, the company said it is preparing to rebrand itself as NEX as it consolidates its remaining business under ICAP NewCo, as highlighted by Finance Magnates in the middle of last month.

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