Norway's antitrust regulator blocks DNB's $1.3 billion Sbanken takeover

OSLO (Reuters) -Norway’s largest bank DNB should not be allowed to buy online rival Sbanken as the deal would hurt customers in the mutual fund market, the Norwegian Competition Authority (NCA) said on Thursday, sending the target’s shares down 10%.

FILE PHOTO: A view of Norwegian bank DNB's offices in Riga, Latvia, November 20, 2013. REUTERS/Ints Kalnins

The decision was in line with the NCA's preliminary findings here released in August. More than 90% of Sbanken's shareholders had accepted DNB's offer of 11.1 billion crowns ($1.28 billion), which both banks' boards backed.

To try to rescue the deal, DNB on Oct. 7 presented amendments to address the NCA’s concerns. But the proposals, which were not made public, failed to change the regulator’s conclusion.

“Neither the companies’ response to the authority’s concerns nor their alleviating proposals have changed the NCA’s opinion,” the regulator said.

DNB said it was considering whether to appeal the decision to the Norwegian Competition Tribunal within a deadline of 15 working days.

DNB Chief Executive Kjerstin Braathen said fund management was only a small part of Sbanken’s business and should not have been significant enough to block the deal.

In an emailed statement to Reuters, she said she completely disagreed with the NCA’s decision.

“The market is developing rapidly and it’s easy for new players to enter the market. The NCA appears to be looking backwards when evaluating this, rather than at the market as it is today,” she said.

“Norwegian banks are competing against foreign banks and giant technology companies, and within fund sales, there is sharp competition from banks and independent platforms.”

Sbanken’s shares fell 10% in early trade, before recovering some losses to trade down 5% at 0953 GMT. DNB’s shares eased 0.5%.

Norway’s bank regulator and the finance ministry had both approved the deal, leaving the question of how it would impact competition as a final hurdle.

If DNB decides to appeal, the Norwegian Competition Tribunal would have up to six months to decide on the matter. But it could also send it back to the NCA, further prolonging the process.

It was not yet clear if DNB will appeal, ABG Sundal Collier analyst Jan Erik Gjerland said.

“Judging from DNB’s own reaction, it appears that they believe their case is strong. But they will of course also have to carefully evaluate the NCA ruling before making any decision,” he said.

More than 90% of Sbanken’s shareholders had accepted DNB’s offer.

While the size of each bank’s market share was business- sensitive information, and thus kept confidential by the NCA, the combined entity would have become “clearly the largest provider” of mutual funds, the regulator said in August.

DNB was advised by in-house broker DNB Markets while Sbanken was advised by Arctic Securities.

($1 = 8.7052 Norwegian crowns)

Editing by Gwladys Fouche, Ed Osmond and Barbara Lewis