Yorkshire takeover given the go-ahead

YORKSHIRE Building Society's takeover of smaller rival Chelsea Building Society has been given the green light by the Office of Fair Trading.

The OFT said the merger will not be referred to the Competition Commission because it doesn't think the deal will restrict competition.

"Based on the evidence available to it, the OFT considers that no competition concerns will arise," it said.

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"The OFT does not believe that it is, or may be the case, that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom."

The merger, which has yet to be voted on by both societies' members, will create a 35bn mutual with over 2.7 million customers.

Yorkshire has warned that job cuts are inevitable from its merger with loss-making rival Chelsea, but indicated the region will be spared the brunt.

The enlarged business, which will be called Yorkshire Building Society, hopes to compete with the UK's high street banks.

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Yorkshire chief executive Iain Cornish, who will head the expanded mutual, said he expects to make savings of between 35m and 40m a year.

"The cost savings are about removing duplicated costs behind the scenes," said Mr Cornish. "We will have one IT system, one chief executive.

"It will involve an impact on jobs. But before we talk about specific numbers we want to consult our staff."

The enlarged mutual's headquarters will be in Bradford, where Yorkshire employs 1,300 staff. Chelsea's head office is split across two sites in Cheltenham and employs 700. One site in Cheltenham will close and some roles will move north.

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Analysts believe the bulk of the job losses will be in Cheltenham and there could actually be an increase in staff numbers in Yorkshire.

The combined business will employ around 3,200 staff before any cuts, with a network of 178 branches. Only 11 branches, in the South, are within a mile of each other and a "handful" are likely to close.

Chelsea, which recorded a 26m loss for the first half of the year, struggled to maintain adequate capital.

It was hit with a 41m charge after falling victim to fraud on buy-to-let and self certification mortgages and had to make a 44m provision for failed Icelandic banks.

Chelsea members will vote on January 22 in Birmingham.

Yorkshire members will vote on January 26 in Bradford.

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For the merger to proceed more than 50 per cent of voting borrowers and more than 75 per cent of voting savers from each society need to vote yes.

If either society fails to gain this level of support, the deal will not go ahead.

The merger then needs formal approval from the Financial Services Authority, which is seen as a formality, and the two societies would come together in April.

Mr Cornish has refuted claims that the merger would be "another HBOS scenario".

Some members have raised fears about the weakness of Chelsea, which is being taken over in a deal which would reinforce Yorkshire's position as the second-biggest building society, behind Nationwide.