On May 17, 2019, the French Competition Authority (the “FCA”) unconditionally approved the acquisition of Ascoval by the British Steel group. Ascoval is a steel mill specialized in the production and supply of semi-finished steel products that are necessary for the production of finished steel products. British Steel is a European steel manufacturer that is active in the production of both semi-finished and finished steel products. Given the limited overlap between the Parties’ activities, the FCA did not identify any horizontal or vertical competition concerns arising from the transaction.
Interestingly, the clearance decision was issued after the transaction was completed. Although in principle, a merger cannot be effectively implemented prior to being approved by the FCA, article L430-4(2) of the French Commercial Code provides that the standstill obligation may be waived in case of “special need” (“en cas de nécessité particulière”), if the parties present a reasoned request. Such derogations are usually granted when the target company is in liquidation or receivership. Other exceptional circumstances include a risk of imminent dissolution of the target, the opening of insolvency proceedings, or the need for the buyer to provide guarantees or obtain external funding to save the target.
In the present case, Ascoval had been placed in receivership in January 2018, and was originally to be taken over by French-Belgian company Altifort, before the latter withdrew its offer. Consequently, the FCA granted a derogation from the standstill obligation on April 19, 2019 three days after the formal notification. This allowed British Steel to submit a firm takeover offer before the Strasbourg
Court of First Instance, which was accepted on May 2, 2019. The peculiarities of the situation nevertheless led the FCA to adopt a decision in four weeks, following an accelerated assessment of the transaction. While British Steel was placed in receivership a few days after the FCA issued is clearance decision, this should not impact the rescue acquisition of Ascoval.
The issuance of a derogation does not prejudge the outcome of the FCA’s final decision. The FCA may still impose commitments on the parties, or prohibit a transaction that would adversely impact competition. For example, in June 2018, in the William Saurin case, despite having previously granted a derogation from the standstill obligation, the FCA imposed commitments on Cofigeo before approving its acquisition of certain securities and assets of Agripole. Following an in-depth assessment, the FCA found that the transaction raised serious competition concerns. In the absence of adequate commitments on Cofigeo’s part, the FCA ordered the divestment of Cofideo’s brand Zapetti. The FCA also ordered the sale of a production site needed for Zapetti’s operation and for the production of private label products in the relevant markets. Following the derogation, the transaction was authorised by the Paris Commercial Court, and later by the FCA under the above-mentioned conditions.