The Commission for the Supervision of Business Competition (Komisi Pengawas Persaingan Usaha/KPPU) has issued Regulation No. 1 of 2009 regarding Pre-Notification on Mergers, Consolidations, and Acquisitions. This regulation has been effective since 13 May 2009.
According to the regulation, mergers and consolidations are classified into two types: (i) mergers and consolidations for businesses, and; (ii) mergers and consolidations for the financial services sector such as banks or non-bank financial instituions.
Companies that may submit a pre-notification report are those companies that fulfill the following criteria (mergers and consolidations for businesses):
a. the combined assets of the merged or consolidated company is more than IDR 2.5 trillion; or
b. the sales value of the merged or consolidated company is more than IDR 5 trillion; or
c. as a result of the transaction, the surviving company controls more than 50% of the relevant market.
In the financial services sector, the following conditions must be fulfilled:
a. the combined assets of the merged or consolidated company is more than IDR 10 trillion; or
b. the sales value of the merged or consolidated company exceeds IDR 15 trillion; or
c. as a result of the transaction, the surviving company controls more than 50% of the relevant market.
In terms of an acquisition, pre-notification can be carried out where the acquisition:
a. of shares totals voting rights of at least 25%; or
b. of shares with voting rights is less than 25% but the acquisition results in the transfer of effective control; or
c. of assets or some other transaction results in transfer of effective control; or
d. causes the value of assets, amount of sales (turnover), or market share to meet thresholds for mergers and consolidations.
A pre-notification can be made after a contract, agreement or memorandum of understanding has been signed; or other written document states that there will be a plan to conduct a merger, consolidation, or acquisition is agreed upon by the parties.
The evaluation phase by the KPPU is divided into: (i) initial evaluation and (ii) full evaluation. The full evaluation is only conducted once the initial evaluation is complete and there is some indication that any proposed merger, consolidation, or acquisition will result in a breach of the prevailing laws and regulations regarding monopolistic and unfair business practices.
The basic purpose of the initial evaluation is to judge whether there are justifiable concerns that the proposed merger, consolidation, or acquisition will trigger a monopoly or some form of unfair business practice. An initial evaluation will not take longer than 30 days if an application has been received and all administrative requirements have been satisfied.
The full evaluation is to provide a more complete evaluation of the proposed merger, consolidation, or acquisition in order that a definitive response can be made on any suspicions that the merger, consolidation, or acquisition will result in a breach of prevailing laws and regulations. A full evaluation is to be completed within 60 days.
Upon completion of the evaluation, the KPPU will provide an opinion which will bind itself but will not bind the business entity in conducting a merger, consolidation, or acquisition. The initial opinion of the KPPU could be an objection, a no objection or a conditional objection. The business entity conducting a merger, consolidation or acquisition may consult the KPPU’s initial opinion with the KPPU no later than 30 days after the receipt by the business entity of the KPPU’s opinion. After the lapse of the 30 day period, the KPPU will announce its final opinion to the public.
The KPPU regulation explicitly states that the pre-notification is voluntary and there is no specific penalty for not notifying the KPPU before a merger, consolidation, or acquisition. |