ISRAEL

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Content last updated: 15-05-2020

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  • Merger Control Regime
  • Merger Screening

2. Nature of merger control regime

2.1 Mandatory or voluntary

2.1.1 Is filing mandatory or voluntary?

Mandatory.

2.2 Suspensory effect

2.2.1 Must completion of the transaction await clearance by the relevant authorities?

Completion of a notifiable transaction must await clearance by the Competition Commissioner.

1. What type of transactions are caught by the merger control regime?

1.1 Concentrations

1.1.1 Type of transactions that are caught by the merger control rules?

The following transactions are caught by the merger control rules:

  • mergers;
  • acquisition, directly or indirectly, or by way of rights accorded by contract, of
    • more than 25% of the nominal value of the share capital;
    • more than 25% of the voting power;
    • the right to appoint more than 25% of the directors;
    • the right to receive more than 25% of the profits; or
    • a significant part of the assets of another company;
  • joint ventures involving any of the above.

The above list is not exhaustive. Transactions caught by the merger control regime include “all transactions that give one company a substantial structural link to another company (or which strengthen an existing link, in a consequential manner), whatever the formal structure of such transaction and whatever technique is used to create such link”.

Further, transactions where one company gains a foothold in another company's decision-making are also caught, e.g. the right to appoint a joint CEO.

1.3 Definition of "control"

1.3.1 How are the concepts of "control" and "change of control" defined?

Control or change of control is not a prerequisite for a transaction to be notifiable, since a 25% acquisition is sufficient for the transaction to be caught by the merger control rules. See Section 1.1.1 above.

2. Establishing jurisdiction for notification of mergers

2.3 General thresholds

2.3.1 Threshold(s) for when a concentration must be notified under the general merger control regime?

Merger filing is needed:

The first alternative threshold:

  • The combined turnover of the undertakings concerned exceeded ILS 360,000,000 in Israel in the last financial year, and the turnover of each of at least two of the undertakings concerned was at least ILS 10,000,000 in Israel in the last financial year.

The second alternative threshold:

  • The combined market share of the undertakings concerned exceeds 50% of the production, sales, marketing or purchasing in the relevant market in Israel.

The third alternative threshold:

  • The pre-transaction market share of any of the undertakings concerned exceeds 50% of the supply or purchase in any market in Israel, regardless of whether the market is connected to the transaction (monopoly rule).

The transaction must have sufficient local nexus to be caught by the Israeli merger control regime. See Section 2.5.1 below.

2.5 Foreign-to-foreign mergers

2.5.1 Do any exemptions, special thresholds etc. apply to foreign-to-foreign mergers, i.e. where none of the undertakings concerned is domiciled in the jurisdiction?

The transaction must have sufficient local nexus to be caught by the Israeli merger control regime. That is, at least two of the undertakings concerned must be companies as defined under the Israeli Companies Act and be:

  • incorporated in Israel;
  • a non-Israeli company registered in Israel as a “foreign company”;
  • a non-Israeli company not registered in Israel, but with a “merger affiliation” with an Israeli company, e.g. a situation where the non-Israeli company, an entity who controls it, an entity controlled by it or an entity controlled by any of them: a) holds more than 25% an Israeli company’s share capital; b) holds more than 25% of an Israeli company’s voting rights; c) has the right to appoint more than 25% of the Israeli company’s directors; or d) has the right to receive more than 25% of the Israeli company’s profits; or
  • a non-Israeli company neither registered in Israel nor affiliated with an Israeli company but which maintains a “place of business” in Israel (e.g. has a distributor), which gives the undertaking concerned the ability to exert significant influence over a local representative (local representative prices, presentation, positioning, identity of customers etc.).

3. Calculation and allocation of turnover, asset value, transaction value etc.

3.1 Relevant turnover

3.1.1 How is turnover defined (e.g. is income from other sources than "ordinary activities to be included, and how are rebates, taxes, internal turnover etc. treated)?

The relevant turnover to be taken into account is the net turnover related to the sale of goods and/or services.

3.2 Relevant period for calculation of turnover

3.2.1 Which financial year(s) is relevant for the calculation of turnover?

The turnover should be based on the last financial year.

3.3 Relevant undertakings for the calculation of turnover

3.3.2 The undertakings whose turnover is taken into account?

Turnover is calculated on a group level.

The Acquirer’s turnover includes the turnover of all entities controlled by the same ultimate controlling owner. The target’s turnover includes the turnover of any entity it controls.

For this purpose, 'control' is possession of more than 50% of a) the right to vote at the general meeting of a company or the equivalent body of another corporation, or b) the right to appoint the directors of a company.

3.3.3 Shall the turnover of the existing seller be included in the target's group turnover?

The seller’s turnover is not included in the calculation of the turnover unless the seller retains a stake in the target or another connection to the target.

3.6 Calculation of other thresholds

3.6.1 The principles for calculation of metrics for other thresholds (e.g. transaction value, market share, share of supply etc.)?

As with turnover, market share is assessed on a group level. See Section 3.3. above.

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