Compass Lexecon advised e& in the European Commission’s first in-depth merger review under the Foreign Subsidies Regulation

Compass Lexecon advised Emirates Telecommunications Group Company (known as “e&”) on its acquisition of PPF Telecom Group, with proceedings by the European Commission under the newly implemented Foreign Subsidies Regulation (‘FSR’). This was the first merger case that went through an in-depth review under the FSR. The European Commission conditionally approved the transaction in September 2024 after an accelerated in-depth review.

Situation

In August 2023, PPF Group (‘PPF’) announced that UAE-based e& would acquire a majority stake in PPF Telecom, a telecommunications provider active in Bulgaria, Czechia, Hungary, Serbia, and Slovakia. As a non-EU company, e& was required to notify the transaction to the European Commission under the new Foreign Subsidies Regulation, which allows the Commission to investigate whether e& had received subsidies that could result in a distortion of competition. Compass Lexecon advised e&’s external legal counsel, Sullivan & Cromwell, and assisted with the FSR filings. This was the first in-depth merger probe under the FSR regime.

Our Role

A team from Compass Lexecon assisted e& and its counsel with the evaluation of the economic terms of the loans utilized by e& to finance its acquisition of PPF Telecom, and whether the loans could lead to actual or potential distortions of competition in the acquisition process. The financial analysis of the loans included the identification of internal and external benchmarks, together with the assessment of multiple features that affect the economic terms of loan financing.

Outcome

The European Commission concluded that e& had received foreign subsidies from the UAE (notably through an unlimited State guarantee), but that such subsidies did not lead to actual or potential negative effects on competition in the acquisition process. However, the European Commission concluded that foreign subsidies could lead to a distortion of competition in the EU internal market post-transaction, and accepted a package of behavioural commitments from e& that would eliminate the risk of future distortions caused by potential future foreign subsidies. The in-depth review was significantly shorter than the full timetable would have allowed.

The team

The Compass Lexecon team, led by EMEA Co-Head Lorenzo Coppi, included Alan Rozenberg, Marcin Pruski, Sara Vojvodic, Ami Shi, Jiangyu Wei and India Riordan.

They advised e&’s external legal counsel from Sullivan & Cromwell, headed by Juan Rodriguez including Marielena Doeding, Suzanne Marton, and Claire Seo-Young Song.