The Impact of the Merger Notification in M&A Transactions in Egypt

The Competition market is regulated in Egypt under Law No. 3 for 2005 and its Executive Regulations, as amended, regarding the Protection of Competition and the Prohibition of Monopolistic Practices (“Competition Law”). Basically, there are two types of merger control, whether, (i) a pre-merger or (ii) a post-merger. Until date, in Egypt, it is a post-merger control regime. Although the Competition Law amendments regarding introducing the pre-merger control regime is currently under review of the Parliament, the Egyptian Competition Authority (“ECA”) has recently partnered up with Governmental authorities in different sectors, such as health care, in order to, indirectly, control the M&A notification in the market. It is worth mentioning that once the pre-merger control is promulgated, the power of the ECA will be enhanced by approving or rejecting the merge or the acquisition of a transaction based on their assessment from a competitive impact perspective.

The Post-Merger Control Regime:

In Egypt, the Competition Law does not set out a pre-merger control regime, until date. Accordingly, the ECA has no right to interfere, suspend or object to any anticipated acquisition or merger of existing companies. However, pursuant to Article 19 of the Competition Law, a notification must be served to the ECA upon acquiring, inter alia, usufruct rights, shares or joint management of another party (ies) (“Notification”).

Pursuant to the Competition Law, the conditions for such Notification are:

• - the combined annual turnover of the concerned parties in Egypt, pursuant to their latest balance sheet exceeds EGP 100,000,000 (one hundred million Egyptian Pounds) (the “Notification Threshold”); and

• the Notification must be submitted to the ECA within 30 days after the date of completion of the relevant transaction.

In case of failure of filling the Notification to ECA within 30 days after the date of completion of the relevant transaction, pursuant to the Competition Law, the relevant parties may be subject to a fine not less than EGP 20,000 and not exceeding EGP 500,000.

Foreign-to-Foreign Transactions’ Notification:

The Notification requirement applies to transactions taking place inside or outside of Egypt as long as the turnover of the concerned parties achieved in Egypt exceeds the Notification Threshold (i.e. EGP 100,000,000).

Pursuant to the latest amendment of the Executive Regulations of the Competition Law that took place in September 2016 and the Notification form, along with ECA guidelines, published on the ECA’s official website in June 2018 outlining the enforcement policy of the Notification process, explicitly reflecting that although the concerned parties are located outside of Egypt and that the relevant transaction shall take place outside of Egypt, a Notification will be required within 30 days from the date of completion of the said transaction as long as their combined turnover in Egypt exceeds the Notification Threshold.

The Exchange Rate:

In connection with the calculation of the exchange rate of the turnover in Egyptian Pounds, the Competition Law has not set the exchange rate to be used for calculation of the turnover (i.e., whether the exchange rate at the date of the financial statements of the concerned parties or at the date of the execution of the acquisition). The ECA shall, subject to its own discretion, specify the relevant date for determining the exchange rate to be used for the calculation of the turnover in Egyptian pounds.

However, such information is very important to be clear since the same turnover in foreign currency might trigger the Notification obligation if calculated in a specific exchange rate and might not trigger such obligation calculated in the other exchange rate.