Authority allows merger of two firms after Ksh17m fine

Wednesday, July 10th, 2024 11:49 | By
Visual representation of mergers and acquisitions. PHOTO/PRINT

Speciality chemicals company Sika International has tapped Skyscraper Holdco in a merger that comes after a Ksh17.4 million fine for contravening the law.

Competition Authority of Kenya (CAK) said that the transaction, which had earlier been implemented without the authority’s authorisation, involved Sika International acquiring direct control of Skyscraper Holdco and indirect control of Master Builders Solutions Kenya Ltd, following the closure of a global transaction.

In October 2023, the parties to the proposed transaction self-reported that the merger was implemented following the close of the global deal earlier that year, while noting that the transaction had not been cleared by the Authority.

According to the Competition Act CAP 504 of the Laws of Kenya, implementation of a merger without approval is an offense and is punishable by conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or both.

Alternatively, the Authority may impose a financial penalty in an amount not exceeding 10 per cent of the preceding year’s gross annual turnover of the undertaking or undertakings in question. '

Combined turnover

The Act also stipulates that merging parties whose combined turnover or assets is over Sh1 billion are required to seek approval from the Authority before implementing any transaction.

“Although the parties’ combined turnover was above Sh1 billion, the target’s turnover/assets was below Sh500 million; and the transaction met the threshold for exclusion from full analysis by the Authority, the merger was implemented without the authority’s authorisation,” CAK said. After self-reporting themselves in 2023, the parties expressed their desire to settle the matter administratively and, in compliance with section 46 of the Act, pay a financial penalty, and thereafter regularise the transaction.

CAK ordered that the merged entity pay a penalty of Sh17.4 million for contravening section 42(2) of the Act and regularise the transaction based on the applicable thresholds.

Upon payment of the penalty, the parties filed a merger application with the Authority and, based on the aforementioned thresholds, the transaction was excluded from full analysis and, subsequently, approved.

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