Experian's proposed takeover of ClearScore could hurt competition, says UK's CMA

Experian said it was disappointed by the findings and would continue to engage with the CMA over the coming weeks to address concerns

Experian "strongly believes" the merger will have a positive impact on competition

Experian PLC’s (LON:EXPN) proposed £275mln takeover of credit score rival ClearScore could hurt competition, stifle product development and impact customers, the competition watchdog has ruled.

The Competition and Markets Authority (CMA) referred the deal for an in-depth Phase 2 investigation in July after highlighting concerns that it could have a negative impact on the services provided to customers.

In a Tuesday statement on the findings of the investigation, the CMA said it has provisionally found that the deal was likely to result in "less intense competition, potentially harming the continued development of digital products, which help people understand their personal finances".

"Our investigation has shown that this is a fast-paced and evolving market and that both Experian and ClearScore are an important part of that," said inquiry chair Roland Green.

"The provisional findings in our investigation show that Experian's proposed takeover of ClearScore is likely to weaken competition in the sector and have a negative effect on the services offered to customers."

READ: Experian has a week to propose measures to ensure its takeover of ClearScore does not harm consumers

Experian said it was disappointed by the findings and would continue to engage with the CMA over the coming weeks to address concerns ahead of the regulator’s final report into the deal early next year.

"We continue to strongly believe that the acquisition of ClearScore will have a positive impact on competition, allowing Experian to help more consumers with their finances by providing greater choice and convenience to them to access personal finance products at the best prices," the company said.

"We also believe we will be able to innovate more and better through the combination of the parties' complementary assets and innovation cultures. We will continue to engage constructively with the CMA over the weeks ahead to seek to address its concerns ahead of the publication of the CMA's final report early in the new year."

In morning trading, shares in Experian were little changed at 1,860p. 

UBS said it sees a strong strategic rationale for the acquisition.

"...ClearScore's technology platform looks a good fit for Experian as it evolves its global consumer offering, and the brands are highly complementary in the UK," the investment bank said.

"We also note that, as B2B competitor TransUnion plans to sell the UK brand 'Noddle' to B2C competitor Credit Karma, the UK market is significantly evolving."

UBS sees the potential for 1-2% earnings accretion by 2020 if the deal is approved. It maintained a 'buy' rating and target price of 2,150p on Experian. 

Quick facts: Experian

Price: 2867 GBX

Market: LSE
Market Cap: £26.04 billion

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