MacRitchie Investments Pte. Ltd., Singapore — Combination C-2018/05/567
- Case No.C-2018/05/567
Ratio decidendi
The rule this decision rests on
A proposed combination that the Commission assesses under the factors in Section 20(4) of the Competition Act, 2002, and finds not likely to cause an appreciable adverse effect on competition in India, is approved under Section 31(1). Where the acquirer's portfolio companies operate in the broad field of the target's business but supply services the target does not offer, there is no horizontal overlap in the relevant sense. In that case, the target's relatively insignificant turnover in India, in a sector marked by high innovation and dynamism, does not raise a competition concern. Where the acquirer confirms that no portfolio company it controls through its group has a vertical relationship with any Indian subsidiary of the target, the parties' businesses exhibit no vertical overlap, and no vertical competition concern arises. An approval under Section 31(1) rests on the accuracy of the information furnished by the acquirer and stands revoked if that information is later found to be incorrect.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
24th May, 2018 Notice under sub-section (2) of Section 6 of the Competition Act, 2002 filed by Macritchie Investment Pte. Ltd.
CORAM:
Mr. Devender Kumar Sikri Chairperson Mr. Sudhir Mital Member Mr. U. C. Nahta Member Mr. Justice G. P. Mittal Member
Legal representatives: M/s Shardul Amarchand Mangaldas & Co.
Order under sub-section (1) of Section 31 of the Competition Act, 2002
1. On 11th May, 2018, the Competition Commission of India (Commission) received a notice under sub-section (2) of Section 6 of the Competition Act, 2002 (Act) given by Macritchie Investment Pte. Ltd. (MRIPL or the Acquirer). Approval of the Commission has been sought for MRIPL’s acquisition of up to 21.3% of the issued and paid-up capital of UST Holdings Limited (UST or Target), on a fully diluted basis and matters incidental thereto.
2. The notice was given pursuant to the execution of a Share Subscription Agreement (SSA) by and between MRIPL and UST on 9th May, 2018. Additionally, a Shareholders Agreement (SHA) was also executed between MRIPL, UST, the existing investor Group of UST i.e. Tricase Investment Holding Inc. and Advantec Holdings SA, and the Sajan Group comprising of Pillai Family Limited Partnership and Mr. Sajan Pillai. Under SHA, MRIPL would enjoy right, proportional to its shareholding, to nominate directors on the board of UST and veto rights in respect of certain matters
Comb. Reg. No. C-2018/05/567
Fair Competition For Greater Good including commencement of new line of business, approval of annual business plan and change in key managerial positions of CEO, CFO and COO.
3. In terms of Regulation 14 of The Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), vide letter dated 14th May, 2018, MRIPL was required to provide certain information/document(s) by 17th May, 2018. Accordingly, MRIPL filed its response on 17th May, 2018.
4. MRIPL is an investment holding company and does not engage in any business operation. It is a wholly-owned subsidiary of Seletar Investments Pte Ltd. (Seletar). Seletar is a wholly-owned subsidiary of Temasek Capital (Private) Ltd., which in-turn is a wholly-owned subsidiary of Temasek Holdings (Private) Ltd. (Temasek), which is an investment company based in Singapore. The portfolio companies of Temasek Group cover a broad spectrum of industries: financial services; telecommunications, media and technology; transportation and industrials consumer and real estate; life sciences and agribusiness; as well as energy and resources.
5. UST, along with its subsidiaries, is engaged in providing Information Technology (IT) services - software development and support services worldwide. In India, UST is present through its subsidiaries.
6. As per the information provided in the notice, UST would utilize a part of the total consideration to buyback certain securities issued pursuant to exercise of stock options held by certain employees and shareholders of UST. From MRIPL’s perspective, the proposed combination is a financial investment, which is taking place in its ordinary course of business.
7. It has been contended in the notice that there is no horizontal overlap between MRIPL and UST. However, MRIPL and Temasek Group is found to have made investments in certain Indian companies that are engaged in providing solutions for placement consultancy, platform for online auction of used cars and secondary sale of automobile components, data centre services and cyber security service. Although these fall within the broad ambit of IT services, UST does not offer any of them. It is also observed that Comb. Reg. No. C-2018/05/567
Fair Competition For Greater Good the turnover of UST in India is relatively insignificant to raise any competition concern given that IT sector, in general, exhibits a high degree of innovation and dynamism.
8. As regards vertical overlap, pursuant to the query raised by the Commission, MRIPL has confirmed that “there is no vertical relationship between the portfolio companies of Temasek Group, which generates revenue from India and any of the Indian subsidiaries of UST. Thus, it has been found that the business of the parties to the combination do not exhibit any vertical overlap.
9. Considering the facts on record, details provided in the notice given under Section 6(2) of the Act and assessment on the basis of factors specified in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have an appreciable adverse effect on competition in India and therefore, the same is hereby approved in terms of Section 31(1) of the Act.
10. This order shall stand revoked if, at any time, the information provided by the Acquirer is found to be incorrect.
11. The information provided by the Acquirer is confidential at this stage, in terms of and subject to the provisions of Section 57 of the Act.
12. The Secretary is directed to communicate to the Acquirer accordingly.
Comb. Reg. No. C-2018/05/567
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