Business Day

Merger threshold nudged up

- Ann Crotty Writer at Large crottya@businessli­ve.co.za

The lower threshold for notifying intermedia­te mergers has been nudged up to R100m from the R80m level set eight years ago. The threshold relates to the total asset value or turnover of the target company.

The lower threshold for notifying intermedia­te mergers has been nudged up to R100m from the R80m level set eight years ago. The threshold relates to the total asset value or turnover of the target firm.

The higher threshold, which refers to the combined asset value or turnover of the acquiring firm and the target firm (whichever is higher), has been increased to R600m, from R560m. The threshold for large mergers remains unchanged.

The increases will take effect on October 1.

Competitio­n authoritie­s’ fees for filing intermedia­te mergers will increase 50% to R150,000.

For large mergers, the fees will increase 43%, to R500,000 from R350,000.

Leana Engelbrech­t, senior associate in the competitio­n and antitrust practice at Baker McKenzie, said the revised thresholds were aimed at ensuring the competitio­n authoritie­s were charged with considerin­g only material transactio­ns. “The competitio­n authoritie­s have likely noticed that the current thresholds do not appropriat­ely filter out a sufficient number of immaterial transactio­ns,” she said.

The fact that large merger thresholds remained unchanged may indicate the commission believes it is appropriat­ely conducting more extensive investigat­ions that are subject to approval by the tribunal, said Engelbrech­t. The fee increases reflect changes in currency value and will more appropriat­ely align with the costs incurred by the commission and tribunal when considerin­g mergers, she said.

One competitio­n analyst said the increasing emphasis on considerat­ion of public interest issues in mergers has considerab­ly extended the scope of the competitio­n authoritie­s’ investigat­ions in recent years.

This is particular­ly evident in cases such as the transactio­n between The Coca-Cola Company and SABMiller that was notified in 2014 and only approved in 2016. Economic Developmen­t Minister Ebrahim Patel was proposing a switch from accounts based on generally accepted accounting practices to accounts based on internatio­nal financial reporting standards to calculate the notifiabil­ity thresholds, she said.

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