In an unprecedented move, Norway’s competition authority requests the acquirer of a 34% stake in a rival to submit a merger filing
Shortly after Competition Commissioner Margrethe Vestager signalled that the Commission may scrap the idea of a notification regime for acquisitions of non-controlling shareholdings, the Norwegian Competition Authority has decided to investigate an acquisition of a non-controlling shareholding of 34%.
No general notification regime
Acquisitions of non-controlling shareholdings are not subject to a general notification regime in Norway, but the authority has the power to request the buyer of a minority stake to submit a merger filing and can even block such deals. The power to order a filing of a non-controlling stake is not subject to any conditions and a request can be made irrespective of the parties’ turnover. The authority does not even have to establish that there are indications that the transaction is likely to affect competition, but a decision to block such a deal requires evidence that competition would be significantly restricted post-merger.
To date, however, no minority acquisitions have been blocked under Norway’s 2004 Competition Act. Also, the power to request filings of such transactions has never been used. Until last month.
The authority’s request for a merger filing was made in the context of the acquisition of 34% of the shares in SB Skog AS, a forestry company, by AT Skog, a cooperative of 7,500 forest owners. The seller is Viken Skog, Norway’s largest cooperative of forest owners, which retains the remaining 66% and will continue to control the target alone. In its letter ordering the acquirer AT Skog to submit a merger filing, the authority points to overlapping activities between the acquirer and the seller. It is not clear from the letter whether the acquirer has any overlaps with the target.
The parties had already entered into a share purchase agreement when the request was made, but the authority acted within a statutory limit of 3 months from the date a binding agreement had been concluded. The request triggers a statutory stand-still obligation on the parties, although this will generally be less difficult to handle in the case of minority stakes than in 100% acquisitions.
At the time of writing, no merger filing by AT Skog has been added to the list of submitted notifications at the authority’s website. It is thus not clear when a decision can be expected.
Does the filing request indicate that such requests should be expected in more minority transactions going forward? It is difficult to say at this stage. The authority very recently blocked the acquirer AT Skog from acquiring another competitor (in a 100% acquisition). The filing request must be seen in the light of the authority’s concerns that competition in this industry may already be weak and that AT Skog may have a degree of market power. Until we know the outcome of the review of this transaction it is too early to draw any broad conclusions. But the filing request does show that merger review of minority acquisitions is a real possibility in Norway.
As some readers will be aware, the Norwegian Competition Authority’s powers to block mergers extend not only to minority acquisitions, but also to any acquisition that falls below the merger filing thresholds. In other words, acquisitions of small targets and deals that otherwise fall below Norway’s filing thresholds do not fall outside Norway’s merger regime altogether. The authority may request merger filings of such transactions and may ultimately block them. AT Skog’s previous acquisition (which was a 100% acquisition, as already mentioned) is in fact the first example of a below-thresholds deal being blocked under the 2004 Competition Act.
In order to avoid inconvenient filing requests – which may be made up three months after a deal has been signed – the parties have the option of submitting a voluntary filing in transactions that fall below the filing thresholds. For some background on this possibility, see this blogpost.