Notification and clearance timetable

Filing formalities

What are the deadlines for filing? Are there sanctions for not filing and are they applied in practice?

The Act has no deadlines for filing. However, parties to a merger are required to notify the Authority and obtain approval before implementing the proposed merger. For sanctions relating to implementation prior to notification and approval, see question 12.

Which parties are responsible for filing and are filing fees required?

The acquiring undertaking and the target undertaking in a proposed merger are each required to notify the Authority. Filing fees are payable based on the combined turnover or assets of the merging parties in Kenya.

The Act does not prescribe which party is responsible for the payment of filling fees, and in practice, the merging parties share the liability

What are the waiting periods and does implementation of the transaction have to be suspended prior to clearance?

Ordinarily, the Authority acknowledges receipt of a merger application within three days of receipt.

The Authority is required to make a determination:

  • within 60 days of the date that it receives a merger filing;
  • if the Authority has requested for further information, within 60 days of the date of receipt of such information; or
  • if the Authority has convened a hearing conference, within 30 days of the date of conclusion of the conference.

Moreover, if the Authority is of the view that a transaction is complex, it is permitted to extend the determination period by an additional 60 days prior to the expiry of any of the foregoing determination periods, by giving a written notice to the undertakings involved.

As indicated in question 9, implementation of the merger transaction is prohibited prior to clearance.

Pre-clearance closing

What are the possible sanctions involved in closing or integrating the activities of the merging businesses before clearance and are they applied in practice?

Consummation or ‘implementation’ of a merger transaction including the integration of activities of the merging businesses (even partly) prior to receiving clearance from the Authority is an offence under the Act. Payment of the full purchase price is deemed to be ‘implementation’ for purposes of the Act, but payment of a deposit of up to 20 per cent of the purchase price is permitted. It would seem therefore that any payment in excess of 20 per cent of the purchase price prior to clearance is prohibited. A merger that is implemented without complying with the notification and approval requirements of Part IV of the Act does not have legal effect in Kenya and parties cannot enforce any agreement in that regard in any legal proceedings.

Any person who fails to comply with the Part IV notification and approval requirements commits an offence and is liable, upon conviction, to imprisonment for a term not exceeding five years or to a fine not exceeding 10 million Kenya shillings, or both. The Authority may also impose a financial penalty for an amount not exceeding 10 per cent of the preceding year’s annual gross turnover in Kenya of the offending undertakings.

Are sanctions applied in cases involving closing before clearance in foreign-to-foreign mergers?

Sanctions can, and as indicated in question 12 above, the Authority will, exercise its jurisdiction to impose sanctions in foreign-to-foreign mergers where the closing occurs prior to clearance.

What solutions might be acceptable to permit closing before clearance in a foreign-to-foreign merger?

Neither the Act nor the Consolidated Guidelines make any provisions for ‘hold-separate/ring-fencing’ arrangements being put in place in Kenya to enable foreign-to-foreign mergers to be implemented outside Kenya.

Public takeovers

Are there any special merger control rules applicable to public takeover bids?

No there are no special merger control rules. Where a public takeover is caught by the provisions of the Act, the provisions of the Act must be applied together with the requirements of the Capital Markets Act Chapter 485A, the Capital Markets (Takeover and Mergers) Regulations 2002, the Nairobi Securities Exchange Rules, the Companies Act 2015 and any other relevant sector-specific legislation.

Documentation

What is the level of detail required in the preparation of a filing, and are there sanctions for supplying wrong or missing information?

The Authority has published a prescribed merger notification form that the acquiring undertaking and the target undertaking are required to separately complete. The level of detail required depends upon the merger characteristics.

For undertakings applying for exclusion from the provisions of Part IV of the Act under and the Merger Threshold Guidelines, such undertakings are required to complete and file Schedule I (questions 1 to 18 only) and Schedule IV of the merger notification form.

For mergers at or above the prescribed thresholds and where the merging parties do not operate in the same line of business, or no vertical relationship exists between the parties, the undertakings are required to complete and file Schedule I (all questions) and Schedule IV of the merger notification form.

For mergers at or above the prescribed thresholds and where the merging parties operate in the same line of business or there are vertical relationships in existence between the parties, the undertakings are required to complete and file Schedule I, Schedule II and Schedule IV of the merger notification form.

For mergers at or above the prescribed thresholds and where the merging parties operate in the same line of business or there are vertical relationships in existence between the parties; or there is a high likelihood that the combined market share of the merging parties is above 35 per cent in one or more markets or one or more of the parties are dominant in at least one market, the undertakings are required to complete and file Schedule I, Schedule II, Schedule III and Schedule IV of the merger notification form.

The Authority is not limited to the questions and responses in the merger notification form and if the information provided by either of the undertakings is not sufficient for purposes of making a determination on the proposed merger, the Authority may within 30 days of receipt of such notification request further information from the undertakings.

In addition, the merger notification form provides for the various documents to be filed:

  • Schedule I requires parties to file a signed copy of the sale and purchase agreement, audited financial statements for the last three years, the latest annual reports, board resolutions and related documents regarding the merger and a breakdown of employees, and plans to realise cost savings, efficiencies and plans documenting investment evaluations;
  • under Schedule II, parties are required to file documents prepared for the board of directors and regulatory bodies in relation to the proposed merger as well as reports, surveys, analysis or other documents assessing the proposed transaction with respect to its impact on competition, and the latest business plans, marketing plans, sales report and strategic plan; and
  • Schedule III requires each party to a proposed merger to submit business plans, marketing plans, including for relevant subsidiaries and divisions and current strategic plan, periodic (such as monthly and quarterly) review of sales and market trends including by customer category and by different geographic areas for the last three years; and pricing schedules including terms of discounts and rebates offered.

Supplying the Authority with materially incorrect or misleading information is an offence under the Act and persons found guilty may upon conviction be liable to a fine of 5 million Kenya shillings or imprisonment for a term not exceeding five years, or both.

Investigation phases and timetable

What are the typical steps and different phases of the investigation?

After a merger notification form is received at the Authority’s offices, the Authority ordinarily acknowledges receipt of the submission in writing and a case officer is assigned to analyse the proposed merger.

At first instance, the submission is evaluated to determine:

  • its completeness, and where necessary additional information, may be requested, or clarifications sought;
  • if the proposed merger is a ‘merger’ within the meaning of the Act;
  • if the Authority has extraterritorial jurisdiction over the proposed merger;
  • if the proposed merger meets the thresholds under the Merger Threshold Guidelines to determine if an application for exclusion from the provisions of Part IV of the Act is appropriate; and
  • any requests for confidentiality that may have been sought, and if acceptable such confidentiality is granted by a letter early on in the evaluation process.

The case officer together with the Authority’s mergers and acquisition division then undertake a complete merger assessment and make their recommendations to its board for a determination. The board then makes its determination, within the prescribed periods and its decision is communicated to the submitting parties.

What is the statutory timetable for clearance? Can it be speeded up?

See question 11 for the statutory timetable.

As a matter of practice, the Authority will in the case of a submission from exclusion of the provisions of Part IV of the Act, communicate its determination within 14 days of receipt of the merger notification form. Where the Authority determines that the proposed transaction is not a ‘merger’ or where an advisory opinion on a proposed transaction is sought, the Authority communicates its decision to the enquiring party in writing within 10 days.