Anticipated acquisition by Deutsche Bank AG of the Depositary and Clearing Centre business of JP Morgan Chase N.A.

Affected market: IPA services for short-term debt financial instruments

No. ME/2197/06

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) of the Enterprise Act given on 31 March 2006. Full text published 11 April 2006.

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

Deutsche Bank AG (DB) is a financial services group active in corporate banking, investment banking, securities transactions and asset & wealth management. Through its Trust & Securities Services business, DB provides issuing and paying agent (IPA) services in respect of EuroCommercial Paper (ECP) and other short and medium term debt financial instruments as well as trustee services, agency services, depositary services, and special purpose vehicle management in respect of a wide range of financial instruments and services.

JPMorgan Chase Bank N.A. (JPMC) is a financial services group active in investment banking, financial services for consumers and businesses, financial transaction processing, asset & wealth management and private equity. Through its Depositary and Clearing Centre (DCC) business, the target of the acquisition, JPMC provides IPA services, custody services, Euroclear depository services and clearing services in respect of London Certificates of Deposit (London CDs). Through another business centre, which is not being acquired, JPMC provides IPA services in respect of EuroCertificates of Deposit (ECDs) and ECP as well as custody services in respect of ECP. DCC's turnover in the UK for 2004 was £ [ ] million.

TRANSACTION

The transaction involves the acquisition by DB of the DCC business of JPMC. DB is not acquiring the JPMC business that provides IPA services in respect of ECDs and ECP as well as custody services in respect of ECP. The acquisition is structured as an asset sale, including client contacts and relationships; operational/technology platform; and employees. 

On 13 January 2006 the parties notified the proposed acquisition to the OFT. The administrative timetable commenced on 6 March and will expire on 28 April.

JURISDICTION

DB and DCC will cease to be distinct as a result of these arrangements. The OFT believes that the share of supply test set out in section 23 of the Enterprise Act 2002 (the Act) is met with regard to the supply in the UK of IPA services in respect of short-term debt financial instruments (see note 1) and, therefore, it is or may be the case that a relevant merger situation will be created. 

THIRD PARTY VIEWS

Third parties were unconcerned about this merger.

ASSESSMENT

DB and DCC overlap in the provision of IPA services in respect of short-term debt financial instruments. Whilst DB is active in the supply of IPA services in respect of ECP, DCC only supplies IPA services in respect of London CDs.

Regardless of the relevant frame of reference used, DB's share of supply post-merger will not be higher than [20-30] per cent in the UK. This share does not raise any issues given that other suppliers remain, barriers to entry are low, issuers exercise a considerable degree of buyer power and all third parties were unconcerned.

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 United Kingdom.

DECISION

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

NOTES

1. DB estimate that its share of supply post-merger in the UK will amount to [20-30] per cent.

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