ANTITRUST BODY RAISES M&A THRESHOLD VALUES

The Philippine Competition Commission (PCC) has raised the thresholds for mergers and acquisitions ( M&As) that require notification, updating the requirements to keep pace with recent developments in the economy.

In its Memorandum Circular No. 18-001 released on Monday, PCC raised the thresholds for notification, which previously pegged the value of the transaction at P1 billion.

The notification requirement is part of PCC’s larger goal of monitoring business deals and stepping in whenever there are anticompetitive concerns.

Any parties doing an M&A must satisfy two tests before being required to notify the competition watchdog. These tests are the size of person test and the size of transaction test. Under the old rules, the size of person test means that at least one of the companies in the deal must be worth more than P1 billion. The size of transaction test, on the other hand, means that the aggregate value of the assets of the acquired company exceed the P1 billion threshold.

With the recent memorandum, the value changes to the following: At least P5 billion for the size of person test and at least P2 billion for the size of transaction.

“The adjustment stems from various considerations, including the size of actual notifications to date, the country’s economic growth, overall inflation and efficient use of the commission’s limited resources,” PCC Chair Arsenio Balisacan said.

MC 18-001 also establishes the automatic adjustment of the threshold every year beginning March 1, 2019, based on the official estimate of the nominal gross domestic product (GDP) growth of the previous calendar year rounded up to the nearest hundred millions.

To date, PCC has received 152 notifications (equivalent to 134 transactions) and approved 125 transactions worth a total of P2.25 trillion, while others are in different stages of review. Majority of these came from the manufacturing, financial, electricity, real estate and transportation sectors.

The new thresholds will be effective fifteen (15) days after its publication. The revised thresholds will apply to M&A transactions with definitive agreements executed after the effectivity of the memorandum circular.

They do not apply to mergers or acquisitions pending review by the commission.