The Competition Authority of Kenya (CAK) has slapped SIKA International with Sh17.5 million after merging with LSF11 Skyscraper Holdco S.a.r.l without the Authority’s knowledge.

According to CAK, the transaction, which was of a global nature, involved Sika International AG (the global acquirer) acquiring direct control of LSF11 Skyscrapper Holdco S.a.r.l. (the global target) and indirect control of Master Builders Solutions Kenya Ltd (the Kenyan target).

Locally, the merger was implemented in May 2023 following the closure of the global transaction.

“Therefore, the transaction qualified as a merger within the meaning of section 2 and 41 of the Competition Act CAP 504 of the Laws of Kenya,” CAK announced in a notice.

“The Competition Act stipulates that a merger, or takeover, may occur when an undertaking directly or indirectly acquires control over another business within Kenya,” it added.

“This may happen through, among others, purchase/lease of shares, exchange of shares, or vertical integration.”

As per the Act, “any person who implements a merger without approval commits an offense and shall be liable on conviction to imprisonment for a term not exceeding five years or to a fine not exceeding ten million shillings, or both.”

In the alternative, the Authority may “impose a financial penalty in an amount not exceeding ten percent (10%) of the preceding year’s gross annual turnover in Kenya of the undertaking or undertakings in question.”

However, CAK has approved the merger after the parties self-reported the deal to it.

“With regard to mitigating factors, one major main consideration was cooperation. The Authority took note that the parties proactively reported the nonconformance, furnished the Authority with all information regarding the acquisition, and cooperated to reach a settlement on the matter,” CAK continued.

“Other key mitigation factors were that transaction contributed to foreign direct investment, ensured job retention, and increased consumer choice through enhancement of the merged entity’s international and regional competitiveness. These mitigating factors significantly reduced the parties’ applicable penalty.”

Sika International is a company incorporated in Switzerland and listed on the Zurich-based SIX Swiss Exchange.

Sika Kenya, which is owned by Sika AG, supplies chemical admixtures, concrete, sealants, bonding, building finishing, refurbishment, industrial flooring, and roofing and waterproofing systems.

Similarly, Skyscraper Holdco is a holding company incorporated in Luxembourg.

In Kenya, the target group controls MBS Kenya, which manufactures construction chemicals categorized under two business lines: concrete production and application and performance flooring.