The merger between the Skipton and Scarborough building Societies, already approved by the U.K.’s financial regulator under a sped-up process at the height of the financial crisis, will be reviewed by a British antitrust agency.
The Office of Fair Trading said today it’s looking into whether the merger will hurt competition in the banking industry. The Financial Services Authority had said in November that it would be best for “shareholders and depositors to process the merger quickly” and that the combination could be approved by a board resolution rather than by a member vote.
The OFT’s investigation underscores the tensions between antitrust enforcement and the emergency deals made at the height of the global financial crisis. Competition rules were already waived by the government in September when it backed a takeover of HBOS Plc by Lloyds TSB Group Plc (LLOY) to avert HBOS’s collapse.
“It would be unusual if they had issues with this merger, particularly in light of HBOS and Lloyds,” said Marc Israel, a lawyer at London-based Macfarlanes specializing in competition issues.
The deal will create the fifth-largest building society in the U.K. with 860,000 members and more than 16 billion pounds ($24 billion) of assets, the North Yorkshire, England-based companies said in November. Scarborough Building Society said in November that it would merge with Skipton after it forecast that falling house prices would result in an “unacceptable reduction in its capital resources.”
“We don’t believe there’ll be any kind of competition issue,” said Rachel Ramsden, Skipton’s marketing director. “We sought clearance from the OFT as we’re obliged to do.”
Scarborough said in an e-mail that the OFT’s statement today “represents the latest stage of the ongoing merger process” and is “standard practice.”
No one was immediately available to comment at the FSA. The OFT can refer mergers that it believes are anti-competitive to the Competition Commission, which can order divestments or even an unwinding of the merger.
Unlike other countries, companies don’t have to obtain permission from U.K. antitrust regulators before a takeover. They can be examined after they merge. The competition authorities’ predecessor agency in 2001 blocked Lloyds TSB’s 18 billion-pound offer for Abbey National Plc.
“We’re obligated to look at the business case of every merger,” said Corinne Gladstone, an OFT spokeswoman. She said there were no tensions between the regulators.
Building societies are lenders that don’t publicly trade their shares and are instead owned by their members. Former building societies Northern Rock Plc and Bradford & Bingley Plc were both nationalized in 2008. They had been trading their shares for several years after a process known as demutualization.
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