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2. Nature of merger control regime
2.1 Mandatory or voluntary
2.1.1 Is filing mandatory or voluntary?
1. What type of transactions are caught by the merger control regime?
1.1.1 Type of transactions that are caught by the merger control rules?
The Saudi merger control regime applies to “economic concentrations” bringing about a change of control. The definition is broad and covers almost every type of transaction resulting in a concentration.
An economic concentration is created by full or partial transfer of ownership (including beneficial ownership) of an entity’s assets, rights, shares, interests or obligations to another entity operating in the Saudi market, whereby the acquirer obtains “dominance by way of merger, takeover, acquisition, or by way of combination of two or more managements into one joint management or any other means that lead to a state of economic concentration”.
1.3 Definition of "control"
1.3.1 How are the concepts of "control" and "change of control" defined?
The concept of "control" is not precisely defined under Saudi competition law. “Control” may include having the opportunity to appoint a member to the board of directors or some influence over the decision-making process in the company, including veto rights.
1.4 Minority shareholdings
1.4.1 Are minority and other interests less than control caught by the merger control rules?
Yes. Please see Section 1.3.1 above.
2. Establishing jurisdiction for notification of mergers
2.1 Merging parties/undertakings concerned
2.1.1 Which undertakings are considered parties to the merger ("undertakings concerned") in the various types of transactions identified under Section 1.1.1 and 1.2.1.
In a merger, the undertakings concerned are the merging entities.
In acquisitions, the undertakings concerned include the purchaser, the seller, and the target.
In the context of joint ventures, the undertakings concerned are the undertakings that jointly control the joint venture, in addition to the joint venture company itself. There is no exact definition of joint control or control under Saudi competition law. It is generally assumed that the broad concept of control set out in the definition of economic concentration (see Section 1.3.1 above) applies to joint ventures as well.
For the purpose of calculating the applicable turnover, all entities engaging in a commercial activity and having a direct involvement in an economic concentration are considered as participating entities.
2.3 General thresholds
Merger filing is needed if the combined global turnover of the undertakings concerned exceeded SAR 100,000,000 in the last financial year.
As laws on merger control in Saudi Arabia are relatively new, there is little or no precedent to guide definitions.
The law does not state whether turnover should be calculated on a global or domestic level but is interpreted to refer to global turnover.
2.4 Other national thresholds for ex ante merger control (e.g. sector-specific rules)
There are restrictions on investment in certain sectors:
- oil exploration, drilling, and production;
- security and detective services;
- manufacturing of military equipment;
- catering to military personnel;
- manufacturing of civilian explosives;
- tourist guidance services relating to Hajj and Umrah;
- commission agents;
- real estate investment in certain regions;
- printing and publishing (subject to a number of exceptions);
- services provided by midwives, nurses, physical therapy services, and certain quasi-doctoral services;
- fisheries; and
- poison centres, blood banks, and quarantine.
In addition, the Saudi Arabian General Investment Authority (SAGIA) requires a minimum Saudi participation in entities that operate within certain sectors, such as retail and wholesale trade, where a minimum of 25 per cent Saudi participation is required). The SAGIA issued a statement in September 2015 saying that it would permit 100% foreign ownership of entities engaged in retail and wholesale trade, but this has yet to be implemented.
For other sectors, non-Gulf Cooperation Council (GCC) countries (i.e. Saudi Arabia, Bahrain, Kuwait, Oman, Qatar, and the United Arab Emirates) must apply for and obtain a foreign investment licence from the SAGIA.
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?
See Section 2.4.1 above.
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 in the ordinary course of business, exclusive of intragroup sales.
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 latest financial year for which audited annual accounts exist.
For entities not required to issue audited financial statements, turnover should be based on the latest profit and loss statements prepared in accordance with the standards of the Saudi Organization for Certified Public Accountants or similar standards adopted by the respective entity.
3.3 Relevant undertakings for the calculation of turnover
3.3.1 The undertakings whose turnover is taken into account?
Turnover is calculated at group level including all undertakings participating in the economic concentration forming a single economic entity. That is, the ultimate parent company and all other entities directly or indirectly controlled by it.
Please see Section 2.1.1 above.
3.3.2 Shall the turnover of the existing seller be included in the target's group turnover?
The seller’s turnover is included in the target’s group turnover if the seller will participate in the proposed economic concentration. See Section 2.1.1 above.
3.4 Geographical allocation of turnover
3.4.1 The principles for the geographical allocation of turnover?
The total global turnover at group level is included in the calculation of turnover for the purpose of the jurisdictional thresholds.
3.7 Special rules
3.7.1 Do any special rules or principles apply to the calculation, allocation etc. of turnover, assets etc. for specific undertakings (e.g. State-owned undertakings, investment funds, credit and financial institutions, insurance companies, financial holding companies, others)?
The turnover of banks is calculated as the sum of interests, income generated from securities, commissions (collected or due), net profit generated from financial transactions, and other operating revenue.
The turnover of insurance companies is calculated as the total amount of premiums, including all amounts collected and due under insurance contracts issued by or on behalf of the insurance company.
3.8 Currency conversion
3.8.1 The exchange rate applied and applicable exchange rate date for conversion of the value of turnover and assets of undertakings in other jurisdictions?
Turnover in foreign currency must be converted into Saudi Riyals using the official exchange rate of the Saudi Arabian Monetary Agency for the relevant financial year. However, the Monetary Agency does not publish historic or average rates, so in practice, the total annual value of the turnover is generally converted using the rate of the last day of the relevant financial year.
and last updated on 18-01-2021 by
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