APPROVAL OF THE MERGER BETWEEN FDH FINANCIAL HOLDINGS AND MALAWI SAVINGS BANK (MSB)

At the 44th meeting of the Board of Commissioners held on 12th February 2016, the Competition and Fair Trading Commission considered an investigation report on the likely effect of the acquisition of MSB Limited by FDH Financial Holdings Limited.

After thoroughly considering the report and the submissions by the parties, the Commission found that the transaction may not likely result in substantial lessening of competition in the banking and foreign exchange trading markets. This finding was based on the following factors:

1. The increase in market concentration resulting from the transaction is within the safe harbour set in the Commission's Guidelines for Merger Assessment;
2. The banking industry is dominated by two big banks which have a market share of about 25% each. The rest of the banks have individual market shares of less than 10%. The merged entity between FDH Bank and MSB would have a market share of about 15%, making it the third largest bank in Malawi. This will likely ease the dominance by the two big banks which would be a positive competitive attribute.
3. MSB was facing statutory closure for failure to meet Basel II requirements.  The Malawi Government, as a sole shareholder in MSB was not prepared to recapitalize the Bank.  Therefore, the transaction has saved MSB from statutory closure which would have negatively affected the stability of the banking industry and resulted in a massive loss of jobs.

The Commission's investigations also showed that the transaction may result in some job losses. Further, there were concerns that the transaction may result in the closure of some MSB branches particularly those in rural areas which are key to fostering financial inclusion in Malawi.

In light of these findings, the Competition and Fair Trading Commission resolved to approve the transaction subject to the parties complying with the following undertakings:

1. The parties will not abuse the increase in market power that the merged bank will acquire as a result of the merger;
2. In line with the sales purchase agreement, the parties maintain the existing MSB staff at the same or improved terms and condition of service and should there be need for retrenchment, all redundancy and termination costs shall be paid accordingly; and
3. Maintain all existing branches of MSB and FDH Bank.

Upon the parties agreeing to these undertakings, the Commission will sign a Memorandum of Undertaking with the parties to ensure that they are complied with.  

CHARLOTTE WEZI MALONDA

EXECUTIVE DIRECTOR