Nigeria’s President has finally given assent to Nigeria’s first Competition/Anti-Trust law (The Federal Competition & Consumer Protection [the Act]) which is intended to be applicable to businesses across the federation. The Act creates a national competition commission (Commission) with the primary responsibility for enforcing the Act and also a Tribunal with the primary responsibility of hearing appeals from the decisions of the Commission and decisions from the exercise of the powers of any sector specific regulatory authority in respect of competition and consumer protection matters.
Our earlier review of the Act via African Private Equity & Venture Capital Association (accessible here) aptly summarizes the immediately foreseeable implications of the Act from a deal making perspective for private equity and strategic investors.
The Commission is expected to shortly issue Merger Guidelines to provide more specific guidance on the scope of the Act as relates to merger/acquisition transactions ( Transactions) including specifying the thresholds that define large and/or small mergers. In the absence of the Merger Guidelines, one cannot accurately determine the full extent of the applicability of the Act to Transactions.
It is atleast clear that the primary focus of the Act are “control” Transactions, i.e. Transactions where an undertaking seeks to gain control, directly or indirectly, over the whole or part of the business of another undertaking.
For dealmakers looking towards Nigeria, the definition of “control” in the Act is particularly instructive, because the wording of the Act suggests that minority acquisitions may also be caught by the Act. This would be the case where an “acquiring” undertaking, (who may not have majority shares, majority votes or majority directorship) has the ability to materially influence the policy of the target undertaking in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of ‘control’ as defined in the Act. This level of influence is very possible in both strategic and private equity acquisitions. Inevitably, this has now become a structuring consideration for private equity and strategic investors. This extended definition of “control” will appear to support the proposition that minority shareholdings may have anti-competitive effects. Without a doubt, existing ( and prospective) voting arrangements between parties to a Transaction will now require an additional level of competition review. Nonetheless, it is useful to note that not all control Transactions (i.e. small mergers) are required to be notified to the Commission for approval.
“Undertaking” typically includes virtually all legal or natural persons carrying on economic or commercial activity, including companies, partnerships and sole proprietorship. It may also include non-profit making organisations like FIFA, the governing body of football or public organisations carrying out commercial or economic activities”
Nigeria’s Securities & Exchange Commission (SEC) has issued a notice that it will continue to exercise regulatory oversight over mergers, acquisitions and or restructurings that involve public companies in furtherance of its statutory obligation to ensure that shareholders of public companies are fairly, equitably treated and given sufficient information concerning such transactions. On this basis, qualifying transactions will now have to obtain a No-Objection from the SEC. From a private equity deal making perspective, PIPE transactions will come within SEC’s regulatory oversight.
Competition law is primarily about the functioning of markets; and so, Nigeria’s new competition law should be of peculiar concern to especially private equity investors (and strategic investors) focused on/present in Nigeria. We are keenly following the process that leads to the issuance of the Merger Guidelines and expect the Commission to consult widely with industry, in this regard.
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