Sika Kenya Limited and Master Builders Solutions Kenya Limited have been fined Sh17.4 million after failing to notify the competition watchdog before their merger.
The two entities involved in manufacturing construction chemicals announced a merger last October following the unification of their parent firms in May 2023. However, the Competition Authority of Kenya (CAK) did not clear the transaction in the local market.
Sika International AG, which controls Sika Kenya, bought into LSF11 Skyscraper Holdco, which had indirect control of Master Builders Solutions Kenya, prompting the subsequent merger of the firms’ Kenyan businesses.
“Therefore, the transaction qualified as a merger within the meaning of sections 2 and 41 of the Competition Act, which stipulate that a merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya,” said the regulator.
The transaction had met the threshold for a mandatory notification based on the merging parties’ combined turnover of Sh1 billion. However, the target’s assets and turnover were under Sh500 million, excluding the deal from the full analysis of the CAK.
The competition regulator had the leeway to impose a fine on the parties of up to Sh10 million for the breach or a financial penalty of an amount not exceeding 10 percent of the preceding year’s gross annual turnover in Kenya.
“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 regularise the transaction,” added the CAK.
The review of the merger would have been excluded from the full analysis of the CAK and, therefore, attract no cost to the parties as per CAK’s service charter.
Merger applications usually fall into two categories where deals assessed to have an impact on competition based on factors such as turnover and existing competitors require the full analysis of CAK.
CAK notes that businesses uncertain on whether a proposed transaction may trigger a merger notification in Kenya should engage the Authority prior to implementing the transaction.
The competition watchdog offers advisory opinions at no cost.
CAK has approved the regularization of the merger between LSF11 Skyscraper Holdco and Sika International after handing down the administrative action.
