GSPC’s unit files detailed merger report with CCI3 min read . Updated: 05 Nov 2012, 11:52 PM IST
Move to pre-empt any monopoly concerns CCI may raise on proposed acquisition of a stake in Gujarat Gas
Mumbai: GSPC Distribution Networks Ltd, a unit of Gujarat state-owned GSPC Gas Co. Ltd, has filed a detailed merger notification with the Competition Commission of India (CCI), ostensibly to pre-empt any monopoly concerns the antitrust watchdog may raise on its proposed acquisition of a 65.12% stake in Gujarat Gas Co. Ltd.
It’s the first so-called Form II filing in India since the merger control regime was enforced on 1 June 2011.
CCI has approved 80 merger notifications since June 2012, but those companies were asked to file Form I applications, which require only basic information pertaining to the deal and a declaration that no anti-competition scenario was foreseen post the acquisition.
Form II requires a detailed economic analysis and competition impact assessment, including an analysis of the overlaps between the business activities of the parties to the merger. If CCI finds there is an anti-competition element in the proposed acquisition, it can block the deal, according to legal experts.
A senior CCI official confirmed the development, but declined to disclose details.
When contacted, executives at Gujarat Gas Co. referred Mint to the company’s legal firm, Amarchand and Mangaldas and Suresh A. Shroff and Co. The law firm, when contacted, declined to comment on the issue.
According to a person close to the development, who spoke on condition of anonymity, the Amarchand Mangaldas competition law team (Mumbai region) led by Cyril Shroff, managing partner, and Nisha Kaur Uberoi, competition partner, had filed the Form II merger notification with CCI on 1 November.
The person added that Form II filing required an economic consultancy firm to submit a report on the economic aspects of the proposed merger after analysing the market share of parties to the combination.
A second person close to the development said GSPC Co. had voluntarily filed Form II to avoid unnecessary time delays in case the watchdog took up the issue.
“CGD (city gas distribution) itself is a monopolistic business. It is like an electricity distribution company. Other companies may use the distribution infrastructure, but not necessarily replicated the distribution infrastructure," he said, requesting anonymity.
On 24 October, Gujarat State Petroleum Corp. Ltd (GSPC) signed an agreement to buy a 65.12% stake in Gujarat Gas Co. from London-based BG Group Plc. for ₹ 2,463.8 crore, resulting in the creation of India’s largest city gas distribution venture, supplying over 8 mmscmd of gas to over 700,000 customers.
BG Group will make a hefty profit from the deal; in 1997 the group had bought the stake in Gujarat Gas Co. from the state government and Mafatlal group for about ₹ 170 crore.
GSPC was earlier planning to jointly bid for this stake along with Oil and Natural Gas Corp. Ltd (ONGC), Bharat Petroleum Corp. Ltd (BPCL) and Oil India Ltd, ONGC chairman Sudhir Vasudeva said in an interview in April that GSPC was to hold 50% equity in the proposed joint venture, Mint reported on 4 October.
An open offer was made for the acquisition of a further 26% of Gujarat Gas Co. under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011. The transaction involves the gas sector, which is regulated under the Petroleum and Natural Gas Regulatory Board Act, 2006.
“Under the Competition Act, it is likely that a Form II filing will go to a Phase II investigation. The maximum period to obtain clearance would be 210 days," said a legal expert, requesting anonymity.
Kaushal Kumar Sharma, founder of KK Sharma Law Officer and former director general at CCI, said this is the first time the CCI would investigate a deal in so much depth.
“If the deal is simple, in foreign countries, it is generally closed in 30 days. If CCI finds a problem of anti-competition, it will ask the parties to address issue or modify the deal or it will block the deal," Sharma said.
CCI will have to start an intense and detailed investigation of the deal. The antrust body will need to coordinate with market regulator Securities and Exchange Board of India because the completion of the deal may be delayed, in turn delaying payments by the acquiring company.