Foreign Subsidies: Conditional Commission approval in first ever in-depth review (Phase 2) for an M&A transaction
Today, the European Commission granted conditional approval (case number FS.100011) for Emirates Telecommunications Group Company PJSC (e&) to acquire sole control of PPF Telecom Group B.V. (PPF, excluding its Czech business) under the EU Foreign Subsidies Regulation (FSR). This approval is conditional on full adherence to the commitments offered by the parties.
The purchaser, e&, is a state-controlled telecommunications provider from the United Arab Emirates offering mobile telephony services. It is controlled by a sovereign wealth fund, the Emirates Investment Authority which is controlled by the UAE. PPF is a European telecommunications provider, based in the Netherlands, operating in the Czech Republic, Bulgaria, Hungary, Serbia and Slovakia. PPF’s operations include providing telecoms services and operating the underlying infrastructure. The European Commission had concerns regarding foreign subsidies that could distort the EU market. The foreign subsidies in question appear to consist notably of (i) an unlimited guarantee from the UAE and (ii) a loan for the benefit of the purchaser directly facilitating the transaction from banks controlled by the UAE.
The Commission launched its first-ever in-depth investigation (“phase 2 investigation”) concerning an M&A transaction on 10 June 2024. It has now taken a conditional decision requesting (i) that e&’s articles of association do not differ from ordinary UAE bankruptcy law, thus removing the unlimited State guarantee, (ii) EIA and e& is prohibited from financing any of PPF’s activities in the EU market, except in specific cases subject to the European Commission’s review. And (iii) e&’s commitment to inform the European Commission about future acquisitions that are not subject to the requirement to notify under the FSR.