The acquisition of a minority shareholdings can qualify as a concentration for the purpose of the EU merger control regime

By the recent decision in IF P&C/Topdanmark (Case COMP/M.6957) the European Commission confirmed that also the acquisition of a minority shareholdings can be considered as a concentration for the purpose of the EU Merger Control Regulation (EUMCR) 139/2004, falling then within the regulatory jurisdiction of the Commission under the EUMCR. In this case the Commission applied the criteria in Paragraph 59 of the Consolidated Jurisdiction Notice to establish whether by the acquisition of the minority shareholding the purchaser would gain the sole control on the other party to the merger. By the planned transaction IF P&C bought the acquisition of a 25,17% shareholding, corresponding to the 26,51% of voting rights, of Topdanmark. On the basis of the criteria in the Notice, the Commission found IF P&C to have acquired the sole control over Topdanmark, which amounted to a concentration for the purpose of the EUMCR.
First, a prospective analysis showed that a shareholder with the 26,51% of the voting rights was likely to achieve a simple majority at the seven most recent general meetings of shareholders of Topdenmark. Second, the Topdenmark shareholding was quite disperse. Only IF P&C held more than 5% of its equity capital. Moreover, IF P&C was the only industrial shareholder and there appeared to be no common interests among the other shareholders so that they could agreed on a common position to be taken with regard to IF P&C. Third, on the basis of its voting rights IF P&C had the power to adopt all the more important resolutions of the general meeting.
Therefore, the Commission was entitled to review the competition impact of the transaction. It unconditionally cleared the notified concentration as it was found to be unlikely to have restrictive effects on competition.

While the debate on whether enlarge the scope of application of the EUMCR to the acquisition of minority shareholdings is gaining momentum, IF P&C/Topdanmark is noteworthy remainder that, in some circumstances, also the acquisition of a minority shareholding can give rise to a change in control, which constitutes a concentration. The Commission findings in IF P&C/Topdanmark are consistent with its approach in Electrabel/Compagnie National du Rhone (Case M.4994). In this case the Commission noticed that  Electrabel had a factual majority at the general meetings of Compagnie National du Rhone. And on  the basis of this finding and other grounds the Commission qualified the transaction as a concentration.

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