The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the UK bank Alliance & Leicester by the Spanish bank Banco Santander. After examination, the Commission concluded that the proposed operation would not significantly impede effective competition in the European Economic Area (EEA) or in a substantial part of it

The proposed transaction, organised in the form of a scheme of arrangement and exchange of shares, would combine the sixth and the eighth largest banks in the UK. Banco Santander is already present in the UK since its acquisition of Abbey National, cleared by the Commission in 2004.

The acquisition will strengthen A&L’s capital and liquidity position, allow substantial  efficiencies – making both A&L and Santander’s UK business (Abbey) better able to  compete and create a more effective competitor in the key personal account and SME  banking markets.

• Banco Santander (Public, MCE:SAN) is the parent company of an international group of banking and financial companies operating in the UK, Spain and some other European countries, as well as in Latin America , active in retail banking, asset management, corporate and investment banking treasury and insurance. With a market value of €92.5bn at year-end 2007, Santander is one of the world’s leading banks by market capitalisation and number one in the euro zone. In the UK, Banco Santander is the parent company and exercises sole control over Abbey National plc.
• Alliance & Leicester (Public, LON:AL), has been operating over 35 years, providing financial services in the UK for personal and commercial customers and has two main business areas, retail banking (personal customers) and commercial banking (business customers).

The main business areas in which the activities Banco Santander and Alliance & Leicester overlap are:

• Retail banking.
• Corporate banking to small and medium-sized enterprises.
• Factoring.
• Payment cards.
• Financial market services and insurance.

However, in all these activities the combined entity would have market shares below 15% and would face strong competition from several UK banks such as Barclays, HBOS, HSBC, Lloyds, Nationwide and RBS/NatWest.

In addition, Alliance & Leicester is present in cash handling and cash sales, markets in which Banco Santander is not active but which would create vertical relationships post-merger. However, given the market structure and the limited shares of Alliance & Leicester, the transaction is not likely to have a significant impact on these markets.

The Commission has therefore concluded that the proposed transaction does not give rise to competition concerns.