On February 09, 2023, the CCI approved the merger between Keimed Pvt. Ltd. (‘Keimed’) and its subsidiaries. ^[1] The merger consisted of internal restructuring of Keimed whereby the:

i.     Businesses of the subsidiaries would be transferred into their respective wholly owned subsidiaries by way of slump sales pursuant to separate business transfer agreements (‘BTA(s)’).

ii.    The subsidiaries would be merged into Keimed by way of separate schemes of amalgamation, and the shareholders of each of the subsidiaries would become shareholders of Keimed, with each of them acquiring minority shareholding in Keimed with no accompanying special rights (‘Schemes’) (BTAs and Schemes collectively constitute ‘Proposed Combination 3’).

The CCI noted that the Scheme implies a change in control over the businesses of Merging Parties from the current joint control of Keimed and respective shareholders of each of the Merging Parties to sole control of Keimed.

Parties to Proposed Combination 3

Presently, Keimed and the Merging Parties are primarily involved in wholesale and distribution of drugs in India, while they also have presence in the segment of retail sale of specialty drugs and sale of medical devices such as medical equipment, surgical devices, implants etc., or consumables/products (such as masks, syringes, gauze etc.).^[2]

Competitive Assessment

The CCI observed that:

i.     The key aspect for examination from competition perspective in cases involving change in control from joint to sole or changes in degree or quality of control is the change in ability/incentive of the entity acquiring sole control resulting from lifting of restraining influence of other shareholders arising from their potentially different interests;

ii.    Such potential differences in interests are more likely in the event of entities involved having separate presence in the related area(s) apart from the entity(ies) which is/are under joint control;^[3]

iii.   However, the market share of Keimed and its subsidiaries in the segment of wholesale and distribution of drugs in India is less than 5%, which is insignificant to cause any change in competition dynamics regardless of the issue of change in degree or quality of control; and

iv.    Further, the presence of these parties in other segments of retail sale of speciality drugs or sale of medical devices/consumables is insignificant as reflected in turnover derived them from these activities.

Accordingly, the CCI approved Proposed Combination 3, holding that it was unlikely to have any AAEC in India.^[4]

[1] Combination Registration No. C-2022/10/979.

[2] One subsidiary is involved in subcontracting manufacturing of pharmaceutical products to third parties and subsequent sale of such products.

[3] The CCI noted that, such potential differences would also depend upon various factors namely, inter alia, extent of shareholding, nature of rights, overall presence of the entity etc.

[4] It may be noted that the CCI kept the issues relating to delineation of relevant market and assessment of impact of Proposed Combination 3 on change in degree or quality of control, open.