Provisional thresholds for M&A notices set as Bayanihan 2 ends

MANILA, Philippines — The Philippine Competition Commission (PCC) has set a provisional threshold for compulsory notification of mergers and acquisitions (M&As) as the two-year temporary thresholds under the Bayanihan to Recover as One Act (Bayanihan 2) already lapsed.

The PCC said proponents of M&A transactions that reach a Size of Party (SoP) of P6.1 billion and a Size of Transaction (SoT) of P2.5 billion now need to notify the PCC for mandatory merger review.

The SoP refers to the aggregate value of assets or revenues in the Philippines of the ultimate parent entity of one of the parties to a transaction, while the SoT refers to the value of assets or revenues of the acquired entity and the entities it controls.

“These thresholds will remain effective until the approval of the commission en banc of new thresholds for compulsory notification,” the PCC said.

According to the commission, the provisional thresholds were effective Sept. 16 and would be implemented until March 2023, when the PCC usually adjusts the thresholds for the M&A compulsory notifications.

Under the Bayanihan 2, which came into effect in September 2020, M&As with transaction values below P50 billion are exempt from the compulsory notification with PCC within two years from the effectivity of the law.

Prior to the Bayanihan 2 law, M&As that meet the P2.4 billion threshold for size of transaction and P6 billion for the size of party are required to be notified with the PCC.

“Since the two-year temporary thresholds of P50 billion for SoP and SoT under the Bayanihan to Recover as One Act (Bayanihan 2) were set to expire on September 15, 2022, the PCC calculated the thresholds to be provisionally set by updating the 2020 thresholds based on the country’s nominal gross domestic product (GDP) growth in the past two years, reflecting the contraction of the economy by 8.09 percent in 2020 and subsequent growth of 8.13 percent in 2021,” the PCC added.

It added that parties seeking confirmation that they are not subject to compulsory notification under the previous P50 billion thresholds must submit definitive agreements signed before Sept. 16 with their letter of non-coverage (LNC) to the PCC’s Mergers and Acquisitions Office.

Under the two-year effectivity of the thresholds under Bayanihan 2, the PCC said it received notifications of nine transactions, six of which were approved, and three withdrawn.

It also processed 55 LNCs for transactions that did not breach the Bayanihan two-prescribed thresholds, involved internal restructuring or consolidation of ownership without change in control, and referred to the acquisition of lands.

“Originally set at P1 billion in 2015 under the Philippine Competition Act, the initial merger thresholds have since been subject to adjustment under PCC Memorandum Circular 2018-001,” the PCC said, adding that this ensures that the notification thresholds account for inflation and the country’s overall economic performance.

To date, the PCC has received a total of 227 notifications and has approved 205 transactions with a combined value of P4.63 trillion.

It has blocked one harmful transaction and conditionally approved two transactions on account of the parties’ commitments to address competition concerns.

The PCC is mandated under the Philippine Competition Act to review mergers, acquisitions, and joint ventures of firms across all sectors that meet the threshold to ensure that these deals do not harm the interest of consumers.