Freeworld Coatings was keen to put the events of the past 12 months behind it and “focus on moving forward”, new chief executive Nauman Malik said yesterday.
He was commenting after the Competition Tribunal’s ruling that Freeworld did not have to sell off its automotive paints business.
In an unexpected about-turn the Competition Commission dropped its requirement that Kansai Paints’s acquisition of Freeworld was conditional on it selling its automotive business. At last week’s hearing, the commission undertook to investigate the source of the information that had led it to believe that a divestiture should be a necessary condition of the transaction.
Lawyers for the commission told the Competition Tribunal that if it emerged from the investigation that the commission had been provided with misinformation, the issue would “be referred for prosecution”.
During the hearing, Competition Tribunal chairman Norman Manoim attempted to clarify why the commission had so dramatically changed its view on the merger.
“I am concerned that because this was a hostile merger, the information may have been imparted to the commission to put the commission on a particular course of conduct to influence that corporate battle.” He said it was important that the commission sent a clear message that if a party provided false information to the competition authorities there would be “consequences”.
What happened in a commercial battle was not the business of the competition authorities, Manoim said.
“But when false information is brought that influences the way regulation takes place and that means regulatory bodies are used opportunistically in that battle, it is important to send the message out that it will not be tolerated.”
In explaining its decision to abandon the divestiture condition, the commission said this was the first time it had considered a merger in which the parties were so hostile.
The commission’s lawyer also noted that because Kansai had appealed the divestiture condition the commission had time to interrogate more vigorously the information that it had previously been given.
Malik, who said he was delighted with the outcome of the tribunal hearing, told Business Report that he now wanted the company to focus on “moving forward” rather than be distracted by the events of the past year. He welcomed the commission and tribunal’s commitment to investigating the process, and said he was keen that the company would no longer be “distracted by other things”.
Despite overwhelming support from Freeworld shareholders, Japan-based Kansai spent a year trying to secure control of Freeworld Coatings.
The deal was considered hostile because it was not supported by the board, whose members had supported an earlier management buyout, backed by Brait. The Brait offer, which was lower than that of Kansai, would have given the Freeworld management a 10 percent stake in the firm.
When the shareholders supported the Kansai offer, the battle for control was taken to the competition authorities. - Ann Crotty