Britain’s competition regulator said on Friday it had started a probe into Nationwide Building Society’s proposed £2.9 billion (€3.4 billion) all-cash deal to buy Virgin Money UK which is led by ex-AIB CEO David Duffy..
The deal, which was announced in March and is expected to close in the fourth quarter of the year, could create the country's second-largest savings and mortgage provider, after Lloyds Banking Group, owner of Halifax.
The Competition and Markets Authority (CMA) said it was considering whether the deal could result in a “substantial lessening of competition” in the UK.
The CMA said the notice on the launch of its inquiry had been sent to the parties, and the regulator has a deadline of 40 days for its Phase 1 decision.
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The CMA also invited comments from any interested parties on the transaction by June 14.
Nationwide is the UK’s third-largest mortgage provider and holds almost one in every £10 saved in the UK, as well as one in 10 of the UK’s current or checking accounts. It describes itself as the world’s largest building society.
Virgin Money is the UK's sixth-largest retail bank by assets and has around 6.6 million customers.
Responding to the deal's announcement in March, analysts said that the transaction could increase competition in Britain's mortgage and savings market and spur a revival in some bank stocks, which have wilted in the face of geopolitical tensions and lacklustre economic growth.
The proposed deal is the latest example of a bounce in merger and acquisition activity among British lenders.
Some British lenders are trying to bolster their balance sheets against a possible rise in bad loans as households and businesses face cost of living pressures.
Barclays in February said it would buy the banking operations of supermarket group Tesco for about £600 million.
Nationwide said last week it could realise as much as a £1.5 billion gain on the Virgin Money acquisition, reflecting reflects the gap between Virgin Money’s tangible net asset value of £4.4 billion and the acquisition price of £2.9 billion. – Reuters
