FNZ’s A$260 million takeover of rival financial software firm GBST has hit a snag as the UK competition watchdog investigates the tie-up.
The Edinburgh-headquartered FNZ purchased the ASX-listed GBST in July following a sinking-lid bidding process that knocked the price down to A$3.85 per share from a starting offer of A$4.
While the deal settled in November, the Competition and Markets Authority (CMA) issued a stop order on FNZ soon after to prevent it absorbing the GBST operations in the UK.
The CMA later revoked the original enforcement order, issuing an almost identical document roping in FNZ’s majority private equity owners – the Canadian Caisse de dépôt et placement du Québec and the Al Gore-founded Generation Investment Management – to the legal action.
According to the most-recent CMA order, the competition regulator “is considering… whether it is or may be the case that a relevant merger situation has been created and whether the creation of that situation has resulted or may be expected to result in a substantial lessening of competition in any market or markets in the United Kingdom”.
UK media reported that in the wake of the GBST takeover and pending transfers, FNZ would more than double its UK investment platform assets from £94.7 billion to £243.6 billion, equating to a more than 60 per cent market share.
Under the terms of the CMA order, the named FNZ-linked entities are banned from any action that may:
- lead to the integration of the GBST business with the FNZ business;
- transfer the ownership or control of the FNZ business or the GBST business or any of their subsidiaries; or
- otherwise impair the ability of the GBST business or the FNZ business to compete independently in any of the markets affected by the transaction.
The CMA, which has yet to fix a formal deadline for the merger investigation, also imposes further strict rules to ensure FNZ continues to run GBST as a completely separate business until the inquiry is completed.
For example, the UK regulator bans FNZ from intermingling business contracts, staff, assets and information technology with GBST.
Among other restraints, the CMA order says “no business secrets, know-how, commercially-sensitive information, intellectual property or any other information of a confidential or proprietary nature relating to either of the two businesses shall pass, directly or indirectly, from the GBST business… or vice-versa…”
The GBST purchase is not expected to create any competitive issues in Australia or NZ where there is little overlap with the FNZ business lines.
An FNZ spokesperson told UK trade press that the group, headed by Adrian Durham, would “cooperate fully with the CMA to provide all the relevant information and will operate the two businesses separately pending completion of the review”.