MOFCOM Issues Its Eighth Conditional Clearance—Minority Shareholders Beware

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Before granting its approval of Alpha V’s acquisition of Savio, China’s Ministry of Commerce (MOFCOM) required the private equity fund to divest its 27.9 per cent stake in Savio’s rival Uster. With this decision, MOFCOM has signalled its willingness to closely scrutinize the influence of minority shareholders when conducting merger reviews under China’s Anti-Monopoly Law.

On 31 October 2011, China’s Ministry of Commerce (MOFCOM) announced conditional approval for the acquisition by Alpha Private Equity Fund V, through its subsidiary Penelope Company Limited, of Savio Macchine Tessili S.P.A. This is the eighth decision in three years in which MOFCOM applied conditions before giving approval for an acquisition in China. MOFCOM required Alpha V to sell its 27.9 per cent interest in Uster Technologies Co., Ltd., a company that has a duopoly with Savio in the market for electronic yarn clearers. Savio, through its wholly owned subsidiary Loepfe Brothers Ltd, has a market share both globally and within China—for electronic yarn clearers of about 52 per cent, while Uster holds the remaining 48 per cent market share. The requirement to sell its shares in Uster is aimed at reducing the risk that Alpha V’s control of Savio, together with its significant equity interest in its only competitor Uster, would lead to a restriction of competition.

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Published In: Antitrust & Trade Regulation Updates, Business Organization Updates, Finance & Banking Updates, Mergers & Acquisitions Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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