News (#09 September 2016)

Biznews

Mergers & Aquisitions

Fairfax Financial Holdings Ltd decided to purchase 9.99% shareholding in Astarta

Canadian financial holding Fairfax Financial Holdings Limited decided to purchase 9.99% of shares in the Astarta company, the largest sugar producer in Ukraine. On 24 August Fairfax signed an agreement with the companies of Astarta’s founders, Albacon Ventures Ltd. owned by Victor Ivanchuk and Aluxes Holding Ltd. owned by Valery Korotkov, who own 37.8% and 25.99%, respectively.

The agreement provides for purchase of 450,000 from Albacon and 2,0475 million shares from Aluxes of agroindustrial holding shares. Astarta shares were traded at about PLN 50 per share (about USD 13.02 at the current rate), which allows for an estimate of the value of the transaction to be around USD 32.5 million.

The agreement is subject to legal regulation, including obtaining the relevant permit from the Antimonopoly Committee of Ukraine, and is expected to be resolved by 24 February 2017.

 

Walmart buys startup Jet.com

The world’s largest retailer, Walmart, has bought e-commerce startup Jet.com, for USD 3.3 billion. Walmart will pay USD 3 billion in cash and USD 300 million in shares. The deal could become the largest acquisition in the sphere of e-commerce in US history.

Jet.com was founded in 2014 by Mark Lor with the aim of building a large-scale online marketplace able to compete with giants like Amazon, Walmart and Costco. The site was unveiled for the general public in July 2015. All-in-all the company attracted more than USD 800 million of investment for two years. For Walmart acquisition of this startup is an attempt to strengthen its competitiveness on the growing market of sales through the Internet. With Jet technology Walmart can more effectively use a similar model of a marketplace on its e-commerce sites. Amazon sells goods from other vendors on its site already and generates about half of its total sales from this.

 

Berlusconi sold football club AC Milan

A group of Chinese investors has signed preliminary agreement with Italian Fininvest to purchase football club Milan. The transaction amount totals EUR 740 million; it includes the club indebtedness in the amount of EUR 220 million. Fininvest, the company owning Milan, founded by the former Italian Prime Minister Silvio Berlusconi, will transfer the Chinese consortium 99.93% shares of the club.

It is expected that the transaction will be closed by the end of 2016. The consortium includes Chinese Haixia Capital and State Development & Investment Corporation.

 

Taxes

EU bound Apple to pay EUR 13 billion in taxes

Antitrust regulators of the European Union have recognized that Apple used illegal tax privileges, and bound the company to pay an additional EUR 13 billion to Ireland. The European Commission concluded that Ireland provided American company Apple with unjustified tax privileges in the amount of EUR 13 billion. Ireland and Apple announced their intention to appeal against this decision of European regulators.

A reminder that the European Commission launched an investigation of Apple in 2014. Last week the U.S. Department of the Treasury published a document in which it stated that the European Commission does not comply with international standards and has a great effect on American companies. However, the Commission responded by saying it considers all companies equally.

 

Trade Facilitation

Accession to Pan-Euro-Med Convention

Ukraine has begun the process of accession to Convention on Pan-Euro-Mediterranean preferential rules of origin (Pan-Euro-Med). Participation in the Convention shall open more favorable conditions for export of goods for Ukraine and increase market representation of Ukrainian goods on the markets of EU Member States, EFTA, Montenegro, Serbia, Morocco, Algeria, Tunisia, Egypt, Israel, Jordan, Turkey, the Faeroe Islands, Albania, Macedonia and Moldova and others.

Convention members use common rules of origin of goods based on diagonal cumulation. That is, goods that received preferential origin status in one of the countries of the Convention can be used in manufacturing processes in any other country without losing their respective status.

 

Ukraine signed free trade zone agreement with Canada

On 11 July 2016 Ukraine and Canada signed an agreement establishing a free trade zone, which will take effect immediately, but will be implemented over seven years. During 2010-2014, the volume of bilateral trade in goods between Ukraine and Canada averaged USD 280 million per year, including imports of Canadian goods — 214 million, and export from Ukraine — 86 million.

The agreement also contemplates provision of technical assistance to Ukraine to improve access of Ukrainian goods to the Canadian market. Ukraine, in its turn, shall eliminate tariffs on 80% of goods imported from Canada. Simultaneously, for some goods transitional periods of 3, 5 and 7 years will be introduced. The most sensitive positions — such as sugar — are excluded from the agreement.

 

Antimonopoly Committee of Ukraine

AMCU approved clarification on calculation of fines

On 9 August 2016 the Antimonopoly Committee of Ukraine approved Informative clarifications on the calculation of fines. The changes are related, inter alia, to the approach to calculation of the basic fine for severe, significant and average violations. So, for its definition to the original amount of the fine special coefficients are applied that take into account the effect of a violation on adjacent markets, social significance of goods, as well as level of profitability of activities related to violation; possibility for provision by the violator of a reasonable calculation of the amount of unlawfully obtained gains and/or losses (damages) to the person whose rights were violated as a result of violations of legislation on economic competition protection in question, so as to calculate the basic amount of a fine.

The document takes into account comments provided by representatives of law firms, business and associations after publication of the Draft Informative clarifications and provided during a public debate held on 3 August 2016.

 

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