Cantillon: State likely to get revised mergers code

It may be some time away yet, but it seems likely that the Republic is going to end up with a revised mergers code allowing the scrutiny of minority stakes, something ruled out by the current regime.

Largely thanks to two Irish companies, the EU is planning to change its competition laws by extending its definition of mergers to situations where companies take significant minority stakes in rivals.

Throughout most of Europe, including the Republic, mergers law only kicks in where deals involve majority stakes – control in other words – but Brussels wants to adopt a system used in Britain and Germany where the threshold is lower and minority stakes can trigger an investigation by the competition authorities.

Two Irish companies, Aer Lingus and Ryanair, have inspired this, and their case is cited in the consultation documents circulated by the European Commission.

The problem here – which the proposed change would address – is that the commission has told Ryanair several times that it cannot take over its rival, but it still allows it to maintain a substantial and potentially influential stake in it. However, change could have ramifications for another high-profile Irish company and a polarising figure from the the State’s business community: Independent News & Media and the 29.9 per cent of the group held by Denis O’Brien.

Any change in the current regime will almost certainly allow scrutiny of stakes on this scale, particularly as they can be used to block extraordinary resolutions.

The speed at which O’Brien’s holding in the group could be opened up to investigation by the State’s Competition Authority will depend on when the EU introduces the changes and how quickly the State moves. Most observers believe it will take a year for the EU to change its laws.

The Republic would be obliged to move quite quickly after that to adopt the new laws.

Once Brussels has moved, however, it may be open to the EU authorities themselves to investigate the matter.

Either way, it’s likely that O’Brien and his lieutenants will pay close attention to any changes as they happen.