PCC voids Udenna’s purchase of 2Go stake, slaps R19.6-M fine

The Philippine Competition Commission (PCC) has declared void the merger of Udenna Corporation and KGL Investment Cooperatief U.A. (KGLI Coop) and slapped them a P19.6 million fine for failure to notify the agency of their merger as part of transactions to acquire a stake in 2Go Group.

In a statement, the PCC said the fine is equivalent to 1 percent of the value of their merger transaction which both companies failed to run by the government agency as required by law.

The transaction involved the sale to Udenna by KLGI Coop of all its shares in KGL Investment B.V. (KGLI-BV). At the time of the transaction, KGLI-BV owned 39.71 percent of KGLI-NM Holdings, Inc. (KGLINM), a Philippine company that partly owns Negros Navigation Co. Inc. (NENACO).

In an en banc decision released on February 19, the Commission found the transaction, worth US$120 million, met the P1 billion threshold, and as such, the transacting parties should have notified the PCC of the acquisition.

Under Section 17 of the Philippine Competition Act (PCA), parties who fail to notify the PCC of a transaction that meets the threshold are slapped with a fine ranging from 1 percent to 5 percent of the transaction value, and their business deal voided.

“The law is clear: an agreement consummated in violation of the competition law’s compulsory notification requirement shall be fined and is considered void,” read the Commission decision.

The PCC got wind of the transaction when it was tipped off by a letter complaint on December 28, 2016.

In its investigation, the PCC Mergers and Acquisitions Office (MAO) found that Udenna bought the entire shareholdings of KGLI-BV as signed by the two parties through a Share Purchase Agreement dated July 28, 2016, and the deal consummated as reflected in a Deed of Transfer dated August 19, 2016.