CAK approves merger between two companies after penalty for unauthorized partnership

According to a report by CAK, Sika International acquired direct control of LSF11 Skyscrapper Holdco S.a.r.l. and indirect control of Master Builders Solutions Kenya Ltd in May 2023, following the closure of the global transaction.

In October 2023, the parties reported to the authority that the merger in Kenya was implemented following the close of the global deal in May 2023, while noting that the transaction had not adhered to the Competition Act and was not cleared by the Authority.

"The parties indicated that they were desirous to settle the matter administratively and, in compliance with section 46 of the Competition Act, pay a financial penalty, and thereafter regularize the transaction," said CAK.

The Authority therefore ordered the parties to pay a penalty of Ksh.17.4 million for contravening section 42 (2) of the Competition Act and regularize the transaction based on the applicable thresholds.

Section 42 (2) dictates that "No person, either individually or jointly or in concert with any other person, may implement a proposed merger to which this part applies, unless the proposed merger is approved by the Authority and implemented in accordance with any conditions attached to the approval."

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

Meanwhile, the authority has urged businesses that are uncertain whether a proposed transaction may trigger a merger notification in Kenya to engage them prior to implementing the transaction.

"The transaction qualified as a merger within the meaning of sections 2 and 41 of the Competition Act CAP 504 of the Laws of Kenya. 

The Competition Act stipulates that a merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya. This may happen through, among others, purchase/lease of shares, exchange of shares, or vertical integration.