Competition Authority of Kenya Approves and Penalizes Unauthorized Merger
The Competition Authority of Kenya (CAK) has approved the regularization of a merger between LSF11 Skyscraper Holdco S.a.r.l and SIKA International, following the self-reporting by the parties of the transaction’s implementation without prior authorization from the Authority.
The merger, which had a global scope, saw Sika International AG, the global acquirer, gain direct control over LSF11 Skyscraper Holdco S.a.r.l, the global target, and indirect control over Master Builders Solutions Kenya Ltd, the Kenyan target. Locally, the merger was enacted in May 2023, subsequent to the closure of the global transaction.
According to the Competition Act CAP 504 of the Laws of Kenya, this transaction qualifies as a merger. The Act specifies that a merger or takeover occurs when an entity directly or indirectly acquires control over another business within Kenya, which can occur through various means, including the purchase or lease of shares, exchange of shares, or vertical integration.
In October 2023, the parties involved self-reported to the CAK that the Kenyan segment of the merger had been implemented in May 2023, post the global transaction closure, without receiving prior clearance from the Authority.
As a result of this contravention of section 42(2) of the Competition Act, the Authority imposed a penalty of Ksh. 17,492,795.23 on the merged entity. Additionally, the parties were required to regularize the transaction in compliance with the applicable thresholds.
The CAK’s decision underscores the importance of adhering to regulatory requirements and obtaining necessary approvals before implementing mergers, particularly in transactions with a global dimension that affect the Kenyan market.
