We agreed with the Federal Antimonopoly Service of Russia on a deal to purchase a 2% stake in an animal feed production company
On October 5, 2023, the Federal Antimonopoly Service of Russia agreed on a petition to issue consent to a transaction for the acquisition of a 2% stake of NPAO De Heus by a minority shareholder.
Our client works in agribusiness and owns stock in companies that manufacture agricultural products and packaging. NPAO De Heus, that is a manufacturer of animal feed in the Vladimir region, was to be acquired.
The shareholder (our client) already owned 49% of the company's shares, but by acquiring 2% of the shares, he would own 51%. Because a controlling stake allows the shareholder to influence the company's activities, such transactions are subject to state control, provided that the assets of the parties to the transaction exceed the legal limits. Furthermore, the second shareholder is a foreign company, necessitating a change in the majority shareholder.
If the total value of the buyer's and the object of economic concentration's assets (the person whose shares are acquired) exceeds 7 billion rubles, their revenue for the previous calendar period exceeds 10 billion rubles, or the transaction price exceeds 7 billion rubles, the transaction must be approved by the Federal Antimonopoly Service before it can be completed.
In our case, the assets of the buyer and the object of economic concentration exceeded 7 billion rubles, approval of the transaction was necessary. Concluding such transactions without the approval of Federal Antimonopoly Service carries a fine of up to 500 thousand rubles, as well as a court application by the Federal Antimonopoly Service to declare the transaction invalid. For a business, the last consequence is the most serious. Because paying a fine isn't as scary as losing the outcome of a transaction.
The Federal Antimonopoly Service of Russia examines such transactions in terms of their impact on competition: whether a change in ownership of shares can lead to market monopolization, increased prices, or other negative consequences. As a result, the FAS has the authority to approve the transaction, on the deal with the injunction (i.e., obligate to perform certain actions), or refuse to approve the transaction.
We have prepared a petition for transaction approval along with the necessary attachments, which typically range from hundreds to thousands of pages depending on the number of people in the group. The Federal Antimonopoly Service examines not only the buyer's and the object of economic concentration's activities, but also their subsidiaries and parent companies. The goal is clear. The buyer may not become a monopolist when the transaction will be completed, but with the group of subsidiaries, it is quite possible.
In addition, information was gathered on the buyer's affiliates and the object of economic concentration (the plant whose shares were acquired). Based on these data, a list of person groups was created, indicating the grounds for affiliation and schematic images of affiliated individuals. These documents must be submitted to the Federal Antimonopoly Service.
Also, a checklist was created for the client's convenience in gathering the necessary documents about the transaction's parties. In particular, the preparer must have notarized constituent documents, documents on the economic activities of legal entities (information about the main buyers, purchases, and key performance indicators) in order to submit an application.
Because we demonstrated that the transaction will not restrict competition in the market, the Federal Antimonopoly Service of Russia granted consent to the transaction without specifying its terms.