How we reached an agreement with Russia's Federal Antimonopoly Service on a deal to acquire a chain of grocery stores
On May 15, 2024, the FAS Russia approved a petition to issue consent to a transaction in which an individual acquired 100% of the shares of two companies. One of the companies owns a chain of grocery stores in the format of convenience stores and supermarkets, while the other is a distribution center that deals with goods storage, shipping, packaging, wholesale of vegetables and fruits, and product delivery, including to the first legal entity's retail chain stores.
Our client (buyer) is a rental business owner in the Republic of Bashkiria who intends to expand into retail.
When preparing the documents, it became clear that the transaction may require the consent of the FAS of Russia in order to be completed, so the client turned to the Tsentralny Okrug Law Firm for assistance in obtaining the FAS's consent to complete the transaction.
Indeed, if the total value of the buyer's assets and the object of economic concentration (the person whose shares are acquired) exceeds 7 billion rubles, their revenue exceeds 10 billion rubles in the previous calendar year, or the transaction price exceeds 7 billion rubles, the transaction must be pre-approved by FAS, before it can be completed.
In our case, the buyer's group of persons and the object of economic concentration had assets in excess of 7 billion rubles, so it was necessary to approve the transaction.
The acquired companies are part of a large holding controlled by relatives, so the companies are part of the same group of people. Because the transactions are interrelated, it was possible to submit one petition for approval of the transaction rather than two - one for each. Concluding such transactions without FAS approval carries a fine of up to 500 thousand rubles, as well as the possibility of the FAS filing an appeal with the court, demanding that the transaction be declared invalid.
FAS Russia examines such transactions in terms of their impact on competition: whether a change of ownership can result in market monopolization, increased prices, or other negative outcomes. As a result, the FAS has the option of approving the transaction, imposing certain conditions, or refusing to approve the transaction.
The retail sector is especially closely monitored because it is the most vulnerable to changes in food prices because monopolization of the food market has a negative impact on consumers.
We have prepared a petition for the transaction's approval, complete with all necessary attachments. FAS investigates not only the buyer's and the object of economic concentration's activities, but also their respective groups of persons. This is required because, while the buyer may not become a monopolist after the transaction is completed, but it is entirely possible with the group of subsidiaries.
In addition, information was gathered about the buyer's affiliates and the object of economic concentration (companies whose shares were acquired). Based on these findings, a list of groups of persons was compiled, indicating the reasons for affiliation and schematic images of affiliated individuals. These documents must be submitted to the FAS.
A checklist was created for the client to make it easier to collect the necessary documents about the parties involved in the transaction (in particular, to submit an application, notarized constituent documents must be prepared, as well as documents on the economic activities of legal entities (information about main buyers, purchases, and key performance indicators).
We also provided information to confirm the presence of other large retailers in the regional market. Furthermore, the buyer has not previously engaged in similar activities, implying that his sphere of influence in the market will not expand.
The above analysis allowed Russia's Federal Antimonopoly Service to approve the transaction without specifying its terms because we demonstrated that the transaction will not restrict market competition.