CWG Acquisition Ltd / Canary Wharf Group plc

OFT closed case: Anticipated acquisition by CWG Acquisition Ltd of Canary Wharf Group plc.

Affected market: Commercial property

No. ME/1615/04

Please note text in square brackets indicates range inserted at request of parties.

The OFT's Decision on reference under section 33 of the Enterprise Act 2002 given on 24 March 2004.


CWG Acquisition Limited (CWG) is a wholly owned subsidiary of CWG Acquisition Holdings Limited.  CWG was formed for the purpose of acquiring Canary Wharf Group plc.  The companies who have an interest in CWG are Hermes Pensions Management Limited (on behalf of the trustees of both the BT Pension Scheme and Royal Mail Pensions Trustees Limited)(see [note 1]), Brascan Corporation, British Columbia Investment Management Corporation and Ontario Teachers' Pension Plan Board.  Providing required relevant approvals are forthcoming Canary Investments will also attain an interest in CWG.

Canary Wharf Group plc (Canary Wharf) is listed on the London Stock Exchange.  Its activities focus on high quality office space and retail facilities in London and involve real estate investment and development; real estate sales and rental; and real estate management. Canary Wharf's UK turnover for the financial year ended 30 June 2003 was £250.3 million.


CWG proposes to acquire the entire issued and to be issued share capital of Canary Wharf.

The transaction was notified on 16 February 2004. The statutory deadline expires on 29 March 2004.


As a result of this transaction CWG and Canary Wharf will cease to be distinct.  The UK turnover of Canary Wharf exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied.  A relevant merger situation will therefore be created.


Hermes is the only CWG participant active in UK real estate and it overlaps with  Canary Wharf in the ownership and rental of office and retail space.  (see [note 2]).

CWG argues that the relevant product market in this case is commercial real estate excluding housing.  Our third party enquiries suggest that all areas of commercial real estate are competitive and un-concentrated with many different players and our assessment shows that even on a narrow product market segmented by commercial property type, such as office, retail, and industrial, no competition concerns arise in respect of this particular transaction.  As a result, it is not necessary to conclude definitively on product market definition in this case.

CWG suggests that the appropriate geographic market in this case is national.  However, our investigation shows that even if the market is segmented regionally to include only real estate in London where all Canary Wharf property is situated, no competition concerns arise in respect of the proposed acquisition.  Due to the lack of competition concerns however a frame of reference is defined, it is not necessary to reach a definitive conclusion on this issue.


(see [note 2]).  Rental share data provided by CWG show that Hermes' and Canary Wharf's estimated combined shares of London real estate rental last year are low even when considered in relation to particular uses of space, such as office space and retail space. The largest overlap is in relation to office space with a combined share of [0-10 per cent] and an increment of [less than 5 per cent].

In terms of Hermes' and Canary Wharf's share of the total value of London real estate, from data provided by CWG and third parties, this is estimated at [10-20 per cent] with an increment of around [less than 5 per cent].  Such a small combined share does not raise competition concerns in this case.

As noted above, our investigation confirms that real estate is a competitive industry with a large number of active players.  Third parties have indicated that Hermes and Canary Wharf do not compete closely with each other.  Hermes competes directly with other investment fund companies whereas Canary Wharf mostly competes with large London office providers such as Land Securities plc and British Land plc.  Overall, therefore, the possibility of this merger raising any competition concerns is negligible.

The OFT does not believe that this merger raises any vertical concerns.


The merger qualifies on the turnover test of the Act.  Due to the lack of competition concerns arising from the merger, it is not necessary to reach a definitive conclusion regarding frames of reference.

(see [note 2]) the transaction represents a small proportion of the overall commercial real estate rental sector and the overlap is not significant enough to raise competition issues.

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.


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


  1. As trustee of the Royal Mail Pension Plan
  2. Text removed at parties request for reasons of commercial confidentiality
Published 24 March 2004