Mergers and Acquisitions Channeled 66 Billion Shillings into Kenya’s Economy in 2018

The value of the mergers and acquisitions that were handled by the Competition Authority of Kenya (CAK) in 2018 contributed a total of 66,071,547,769 shillings to the Kenyan Economy.

The annual report for the financial year 2017/2018 released by the CAK revealed that the authority handled a total of 150 notifications for mergers, out of which 148 were finalized while 2 were ongoing. The merger notifications were mainly from the manufacturing, real estate, distribution, investment, services, advertising and agricultural sectors.

The manufacturing sector accounted for the highest number of mergers, recording a total of 30 merger notifications out of the 150 notifications. Following closely with 25 mergers notifications was the wholesale and retail trade sector which recorded a total of 25 mergers.

Of the 150 merger notifications, 55.3 percent had an international dimension mainly involving private equity funds which reveal Kenya’s attractiveness as an investment destination for foreign investors. The rest of the 44.7 percent mergers notification were local unions.

During the year under review, the Authority reviewed and subjected the Merger Threshold Rules to stakeholders’ comments. The rules are expected to increase transparency, predictability, and accountability among the business community regarding the Authority’s merger enforcement process.

Trends in Merger Notifications during the last 3 Financial years

There has been a steady merger trend within the manufacturing sector since 2015 all through to 2017 with a 19 percent share of all the total mergers recorded by the CAK. However, in the year 2018, the number of mergers declined by 2 percent after recording a 17 percent share of all the total mergers.

The real estate recorded a 5 percent growth in the number of merger notifications recorded in 2018. The sector recorded a 12 percent share of the total mergers in 2018 up from 7 percent the previous year.

The finance and insurance sector recorded a 10 percent share of the total merger notifications issued to the authority in 2018. This was a 5 percent growth on top of what was recorded the previous year.

Major Merger Transactions in 2018

Acquisition of 100 percent of The Issued Share Capital of Engen International Holdings (Mauritius) Limited by Vivo Energy Holding B.V.

The parties to the transaction were both involved in importation and sale of petroleum products, making this the two relevant product markets in which the proposed transaction was analyzed.

The relevant product markets that were considered were the markets for; the importation of Petroleum Products and the downstream market for retail of Petroleum products.

The Acquisition of the Unilever Baking, Cooking and Spreads Business by Sigma Bidco B.V

This was a global transaction and involved the acquisition of the entire Unilever Spreads business by Sigma Bidco B.V.

Sigma Bidco B.V. is controlled by Kohlberg Kravis & Roberts Company Limited Partnership (KKR), which is an American private equity fund. KKR through its subsidiaries has operations across the world and deals in health products, surgical equipment, electronics, and toys. The acquirer had no subsidiary in Kenya.

In regard to public interest issues, the merger was found likely to lead to loss of employment especially in the target business section. To address this concern, the transaction was, therefore, approved on condition that Sigma Bidco B.V (acquirer) would absorb all the employees of Unilever who were directly involved in the section of the business that was acquired.

The Acquisition of 100% of the Issued Share Capital Saham SA by Sanlam Emerging Markets (Ireland) Limited

The parties’ activities join in the provision of life insurance, non-life insurance, and reinsurance services and therefore the relevant product markets were defined as the markets for the provision of life insurance, non-life insurance, and reinsurance while the relevant geographic market was defined as national since the merging parties provide their services across the country.

The condition imposed to remedy public interest concerns will protect employment and in addition, the approval of the transaction will increase the ability of the merged entity to compete with the stronger players and consumers of insurance will likely benefit from the increased competition.