Answer ... In order to determine whether a transaction should be notified to the PCC, one should refer to the thresholds under Rule 4 of the PCA-IRR and the latest PCC Memorandum Circular on notification thresholds, considering that the PCA grants the PCC the power to set the thresholds for notification. The PCC provides as follows in relation to the size of party and the size of transaction thresholds:
- The size of party threshold pertains to the computation of the aggregate value of the assets in the Philippines, and revenues from sales in, into or from the Philippines, of the filing UPE, including all entities that it controls, directly or indirectly.
- The size of transaction threshold pertains to the computation of the value of the assets being acquired or/and the gross revenues generated by the assets being acquired, or of the acquired entity and entities it controls, depending on the type of transaction, as provided under Rule 4, Section 3(b) and (d), as amended.
Rule 4, Section 3 of the PCA-IRR provides that the parties to a merger or acquisition must provide when the transaction meets both the size of party and size of transaction thresholds, as follows.
The size of party is met where the aggregate annual gross revenues in, into or from the Philippines, or the value of the assets in the Philippines, of the UPE of at least one of the acquiring or acquired entities, including all entities controlled by the UPE, directly or indirectly, exceeds PHP 7 billion.
The size of transaction threshold is met where the value of the transaction exceeds PHP 2.9 billion and any of the following criteria are satisfied:
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with respect to a proposed merger or acquisition of assets in the Philippines, either:
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- the aggregate value of the assets being acquired in the proposed transaction exceeds PHP 2.9 billion; or
- the gross revenues generated in the Philippines by assets acquired in the Philippines exceed PHP 2.9 billion;
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with respect to a proposed merger or acquisition of assets outside the Philippines:
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- the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2.9 billion; and
- the gross revenues generated in the Philippines by those assets exceed PHP 2.9 billion;
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with respect to a proposed merger or acquisition of assets inside and outside the Philippines:
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- the aggregate value of the assets in the Philippines of the acquiring entity exceeds PHP 2.9 billion; and
- the aggregate gross revenues generated in the Philippines by assets acquired both inside and outside the Philippines collectively exceed PHP 2.9 billion; and
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with respect to a proposed acquisition of voting shares of a corporation or an interest in a non-corporate entity:
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- either the aggregate value of the assets in the Philippines that are owned by the corporation or non-corporate entity or by entities it controls, other than assets that are shares of any of those corporations, exceed PHP 2.9 billion; or
- the gross revenues from sales in, into or from the Philippines of the corporation or non-corporate entity, or entities it controls, other than assets that are shares of any of those corporations, exceed PHP 2.9 billion; and
- either, as a result of the proposed acquisition of the voting shares of a corporation, the entity or entities acquiring the shares, together with their affiliates, will own voting shares of the corporation that, in aggregate, carry more than 35% or, where the entity or entities already own more than 35%, 50% of the votes attached to all the corporation’s outstanding voting shares; or
- as a result of the proposed acquisition of an interest in a non-corporate entity, the entity or entities acquiring the interest, together with their affiliates, would hold an aggregate interest in the non-corporate entity that entitles them to receive more than 35% or, where the entity or entities already own more than 35%, 50% of the profits of the non-corporate entity or the assets of that non-corporate entity on its dissolution.
- Where an entity has already exceeded the 35% threshold for an acquisition of voting shares or the acquisition of an interest in a non-corporate entity, another notification will be required if the same entity will exceed the 50% threshold after making a further acquisition of either voting shares or an interest in a non-corporate entity.
In the case of a notifiable joint venture transaction, an acquiring entity will be subject to the notification requirements if either:
- the aggregate value of the assets that will be combined in the Philippines or contributed into the proposed joint venture exceeds PHP 2.9 billion; or
- the gross revenues generated in the Philippines by assets to be combined in the Philippines or contributed to the proposed joint venture exceed PHP 2.9 billion.
In determining the assets of the joint venture, the following shall be included:
- all assets which any entity contributing to the formation of the joint venture has agreed to transfer, or for which agreements have been secured for the joint venture to obtain at any time, whether or not such entity is subject to the requirements of the act; and
- any amount of credit or any obligations of the joint venture which any entity contributing to the formation has agreed to extend or guarantee at any time.
A merger or acquisition consisting of successive transactions, or the acquisition of parts of one or more entities, which will take place within a one-year period between the same parties, or any entity they control or are controlled by, or are under common control with, will be treated as one transaction. If a binding preliminary agreement provides for such successive transactions or acquisitions, the entities must provide notification on the basis of that preliminary agreement. If there is no binding preliminary agreement, notification must be made when the parties execute the agreement relating to the last transaction which, when taken together with the preceding transactions, satisfies the above thresholds.
For the purposes of calculating the notification thresholds:
- the aggregate value of assets in the Philippines will be as stated in the last regularly prepared balance sheet or the most recent audited financial statements in which those assets are accounted for; and
- the gross revenues from sales of an entity will be the amount stated in the last regularly prepared annual statement of income and expense of that entity.
The above threshold amounts were set pursuant to Commission Resolution No. 04-2023 dated 16 February 2023. Further information can be found in the Guidelines on the Computation of Merger Notification Thresholds, available on the PCC’s website.