Swiss construction chemicals giant SIKA International has been slapped with a Sh17.5 million fine by the Competition Authority of Kenya (CAK) for failing to notify the authority about its merger with LSF11 Skyscraper Holdco S.a.r.l.

The global transaction involved Sika International AG acquiring direct control of LSF11 Skyscraper Holdco S.a.r.l. (global target) and, consequently, indirect control of Master Builders Solutions Kenya Ltd (Kenyan target), according to the CAK.

The local merger was implemented in May 2023, following the completion of the global deal.

"The transaction qualified as a merger under sections 2 and 41 of the Competition Act CAP 504 of the Laws of Kenya," CAK stated in an official notice.

The Competition Act mandates notification for mergers or takeovers where an undertaking acquires control over another Kenyan business.

This can occur through various means, including "purchase/lease of shares, exchange of shares, or vertical integration," as per the Act.

Furthermore, the Act stipulates that "any person who implements a merger without approval commits an offence" and faces potential imprisonment or a fine not exceeding Sh10 million.

Alternatively, the CAK can impose a financial penalty capped at 10 per cent of the preceding year's Kenyan turnover of the undertakings involved.

However, considering mitigating factors, the CAK ultimately approved the merger after Sika International self-reported the deal.

"The Authority took note that the parties proactively reported the non-conformance, furnished all information regarding the acquisition, and cooperated to reach a settlement," explained the CAK.

The proactive approach, coupled with the positive economic impact of the merger, significantly reduced the applicable penalty.

The CAK highlighted that the transaction "contributed to foreign direct investment, ensured job retention, and increased consumer choice through enhancement of the merged entity's international and regional competitiveness."

Sika International, a publicly traded company on the SIX Swiss Exchange, owns Sika Kenya, a supplier of construction chemicals like admixtures, sealants, and flooring solutions.

Skyscraper Holdco, on the other hand, is a Luxembourg-based holding company that controls MBS Kenya, a manufacturer of construction chemicals for concrete and flooring applications in Kenya.