The Competition and Markets Authority (CMA) said today it will refer a proposed deal between brokers Icap and Tullett Prebon for an in-depth investigation if the companies do not address the watchdog's competition concerns relating to broking of oil products.
Icap announced last November that it was selling its global voice-broking and information business to Tullett Prebon, in a deal expected to deliver around £60m in savings for Tullett.
Today, the competition regulator said it believes the proposed merger gave 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 said it was concerned about "the overlap in voice/hybrid broking of oil products where approximately £228m 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," said the CMA's executive director of markets and mergers, Andrea Coscelli.
"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."
Tullett Prebon said it "intends to explore how best to satisfy the CMA's concerns", and still thinks the acquisition is on track to close in 2016.
Icap, which is planning to rebrand as NEX Group after the deal completes, also said it is confident that clearance from the CMA will be obtained and said that, together with Tullett Prebon, it is "in the process of obtaining the necessary remaining regulatory and competition approvals from relevant authorities".
Tullett's shares were down 2.21 per cent in mid-morning trading, while Icap's stock was down 0.67 per cent.