Affected market: Banking and financial services
The OFT’s decision on reference under section 33 given on 2 June 2005.
Full text of decision published 8 June 2005.
Kaupthing Holdings UK Limited (Kaupthing UK) – is a wholly-owned
subsidiary of Kaupthing Bank hf (Kaupthing Bank), an investment bank
based in Iceland. Its UK operations focus mainly on investment banking
advisory services and some corporate banking services, specifically the
provision of acquisition and leveraged finance in respect mergers and
acquisition projects undertaken by its investment banking arm. It is
also a partner in NBSAM, which provides specialist credit management
services to third parties in the UK. Kaupthing Bank’s UK turnover for
2004 was approximately £ .
Singer and Friedlander Group plc (S&F) – is a specialist banking
and investment management group, providing a range of services to
private clients, their corporate vehicles and other institutions.
S&F’s UK turnover in 2004 was approximately £220 million.
Kaupthing UK proposes to acquire the entire issued and to be issued
share capital of S&F not already owned by Kaupthing Bank or by a
subsidiary of Kaupthing Bank. The transaction is to be effected by way
of a recommended cash offer by Deutsche Bank AG London on behalf of
Kaupthing UK. The final consideration is not expected to exceed £440
The parties submitted a merger notice on 5 May 2005 and the 20-working
day statutory deadline expires on 3 June 2005.
As a result of this transaction Kaupthing UK and S&F will cease to
be distinct. The UK turnover of S&F exceeds £70 million, so the
turnover test in section 23(1) (b) of the Enterprise Act 2002 (the Act)
is satisfied. Arrangements are in progress or in contemplation which, if
carried into effect, will result in the creation of a relevant merger
Kaupthing Bank is an investment bank and S&F is a specialist banking
and investment management group. The parties overlap in the provision of
corporate banking services.
Under the broad umbrella of corporate banking services, the parties
overlap in the provision of acquisition and leveraged finance. Kaupthing
Bank’s corporate banking activities in the UK are limited to the
provision of acquisition and leveraged finance in respect of merger and
acquisition projects. S&F supply a wider range of corporate banking
services in the UK which also includes leveraged finance.
Customers have a requirement for a particular banking service depending
on the transaction. Other types of banking services do not appear to be
close substitutes for acquisition and leveraged finance and corporate
banking. Demand- side substitution therefore appears limited.
As to supply-side substitution, evidence from third parties suggests
that it would be possible for existing UK suppliers of other banking
services to enter the corporate banking segment.
Evidence of limited demand-side substitution may suggest that a narrow
frame of reference of acquisition and leveraged finance services would
be appropriate. However, given that the OFT concludes that no
competition concerns arise on any definition (see below), it is not
necessary to reach a firm conclusion on the relevant product frame of
The geographic scope for corporate banking services and acquisition and
leveraged financing may be as wide as the European Union or even global.
Some third party evidence suggests that a foreign bank would only be
considered if it has a UK presence. Given that no competition concerns
arise it is not necessary to reach a firm conclusion on this issue.
The parties overlap in the broad area of corporate banking services
which has a number of niche segments. Kaupthing Bank’s UK corporate
banking activity is limited to the provision of acquisition and
leveraged finance and it is in this particular segment of corporate
banking services the parties directly overlap. To the extent that
acquisition and leveraged finance were taken as the relevant frame of
reference (contrary to certain indications discussed above), even with
this narrow frame of reference the parties’ combined share of supply
will be minimal. The parties estimate their post-merger combined share
in the supply of acquisition and leveraged finance to be significantly
less than 5 per cent (increment 0.3 per cent)(see [note 2]).
Moreover, this segment is characterised by numerous suppliers, which the
OFT believes will exert a constraint on the parties post-merger.
Barriers to entry and expansion
Given that there are no competition concerns that arise from this
transaction, it is not necessary to conclude on barriers to entry.
The OFT has found no evidence that this transaction raises any vertical
THIRD PARTY VIEWS
No third party expressed any concern about this transaction.
This transaction does not appear to raise significant concerns on any
reasonable frame of reference. Kaupthing Bank has limited UK activities
and the parties tend to focus on different facets of investment banking.
In those segments where the parties’ activities do overlap, even on a
narrow frame of reference the parties’ combined share of supply will be
minimal. The segment of overlap has numerous active suppliers.
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 UK.
This merger will therefore not be referred to the Competition Commission
under section 33(1) of the Act.
- The turnover figure was excised from text at Kaupthing Bank’s
- The parties’ estimate was sourced from Thomson Financial.