Interconsumer presented the Competition Authority of Kenya (CAK) with a fait accompli in 2015 when its lawyers inquired whether the company’s buyout of tissue paper manufacturer Belsize Industries Limited two years earlier was in line with the applicable takeover rules.
The company, which manufactures sanitary products, faced a fine of up to 10 per cent of its annual sales but pleaded to be let off the hook.
The CAK, however, decided to impose a smaller fine of Sh1.5 million, noting that Interconsumer had co-operated with the investigators, among other mitigating factors.
Interconsumer Products, a company owned by billionaire entrepreneur Paul Kinuthia, has run into trouble with the competition regulator after it was found to have acquired a rival firm without necessary approval.
Interconsumer presented the Competition Authority of Kenya (CAK) with a fait accompli in 2015 when its lawyers inquired whether the company’s buyout of tissue paper manufacturer Belsize Industries Limited two years earlier was in line with the applicable takeover rules.
The company, which manufactures sanitary products, faced a fine of up to 10 per cent of its annual sales but pleaded to be let off the hook.
The CAK, however, decided to impose a smaller fine of Sh1.5 million, noting that Interconsumer had co-operated with the investigators, among other mitigating factors.
“The Competition Authority of Kenya imposed a financial penalty of Sh1.5 million on Interconsumer Products Limited for acquiring 100 per cent of the assets of Belsize Industries Limited without regulatory approval prior to implementation of the transaction,” the regulator said in a statement.
CAK noted that the company breached Section 42 (2) of the Competition Act, which states that “No person, either individually or jointly or in concert with any person may implement a proposed merger to which this part applies unless this merger is approved by the Authority.”
Interconsumer bought Belsize when it was almost going under, arguing that the hasty buyout was necessary to save the jobs of the target’s nine employees.
The company further told CAK that it had suffered increased competition from cheaper local and Chinese toilet towels besides taking a cash flow hit from closure of supermarkets in the country.
In these circumstances, a high penalty would have hampered its operations, Interconsumer argued. The buyout of Belsize was part of Mr Kinuthia’s plan to grow his sanitary venture after selling a cosmetics business in a transaction that made him a billionaire.
The businessman in April 2013 announced that he had created Interbeauty Products Limited to spin off his cosmetics business to French cosmetics giant L’Oreal in a deal estimated to have earned him Sh1.5 billion. A month later, he swooped on Belsize in a transaction that put him on the regulator’s radar. “Belsize was a private company limited by shares incorporated on 2012 and was involved in the manufacture of three brands of tissue paper namely; Sawa, Tosha, and Fluffy,” CAK said.
“However, after being in operation for just five months (May 2013 – November 2013), Interconsumer acquired ultimate control (100 per cent) of Belsize’s business through the purchase of its assets.”
Mr Kinuthia earlier said that the L’Oreal deal not only gave him an opportunity to harvest his investment, but also the muscle to go big in the sanitary care market he entered in 2008.
Interconsumer started importing sanitary pads and diapers from China and in late 2013 started manufacturing its brands including All-Tyme sanitary pads and Bouncy diapers in Nairobi.
Acquisition of Belsize expanded the company’s product range to tissue paper. Interconsumer is among the companies that have attempted or completed controversial merger and takeover deals in recent years, putting them in the regulator’s crosshairs. Tuskys Supermarkets, for instance, attempted to rescue rival Nakumatt Holdings through several deals including a merger, management services and a restocking plan.
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