Tullett and ICAP merger faces an in-depth investigation 


Tullett’s anticipated acquisition of ICAP’s voice/hybrid broking business faces being referred for an in-depth investigation by the CMA.

Tullett Prebon plc (Tullett) and ICAP plc (ICAP) are leading global interdealer brokers, companies that typically sit between investment banks helping to find buyers and sellers of large securities. ICAP is selling its voice/hybrid broking and information businesses to Tullett.

After considering in detail the 20 overlapping product categories (eg Spot FX, Equity Derivatives, Interest Rate Swaps, etc) in which the parties’ voice/hybrid broking services overlap, the Competition and Markets Authority (CMA) believes that for all but one of these overlapping product categories there is no realistic prospect of a substantial lessening of competition as a result of the merger.

However, the CMA believes that the merger does give rise to a realistic prospect of a substantial lessening of competition for the voice/hybrid broking of oil products where competition from other brokers is more limited, there is a lesser constraint from electronic platforms and exchanges, and the CMA received a number of third party concerns.

The CMA did not find any competition concerns in relation to the provision of data sales and electronic platforms, nor the supply of risk mitigation services in which the parties’ activities will overlap as a result of the acquisition by ICAP of a minority stake in the newly enlarged Tullett.

The merger will therefore be referred for an in-depth phase 2 investigation by an independent group of CMA panel members unless Tullet and ICAP are able to offer undertakings which address the CMA’s competition concerns in relation to broking of oil products (see notes).

Andrea Coscelli, CMA Executive Director of Markets and Mergers, and decision-maker in the phase 1 investigation, said:

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. 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.

Source: GOV UK

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