Australian Merger Reforms

• "Australian revenue" refers to the entity's gross revenue that is attributable to transactions or assets within Australia, or transactions into Australia, determined in accordance with accounting standards for the entity's most recently ended 12-month financial reporting period.
• The meaning of "connected entity": Two entities will be connected where (i) they are related bodies corporate or; (ii) one controls the other, or (iii) they are both controlled by the same third entity. An entity is related to the first entity where it is the holding company (i.e. parent) or subsidiary of the first body corporate, or if both the first entity and the second entity are subsidiaries of the same holding company (i.e. owned by the same parent). Control is interpreted consistently with section 50AA of the Corporations Act 2001 (Cth) but amended to include joint control by associates; as well as provisions for special purpose vehicles and subsidiaries.
• Which connected entities are included in revenue calculations?: The Australian revenue of the Acquirer's connected entities is included in the Acquirer's revenue calculations. The Australian revenue of the Target's connected entities is included in the Target's revenue calculations if those entities are being indirectly acquired through the acquisition.
• No double counting: Australian revenue of a controlled entity should not be included in the calculation if the revenue is included in the parent entity's consolidated Australian revenue.
• Cumulative calculations of previous acquisitions: 2(b)(ii) and 2(c)(ii) above will include previous acquisitions by the Acquirer in the past 3 years predominantly involving goods or services that are substitutable for (i.e. competitive with) the current shares or assets being acquired, disregarding geographical factors. The relevant date for calculation of this revenue from previous acquisitions is the contract date for those acquisitions. However, the following should be excluded from this calculation: (a) acquisitions previously notified under the new regime (other than because of the previous operation of the serial acquisitions calculations); (b) acquisitions where the target's Australian revenue was <$2 million when the acquisition was put into effect; and (c) acquisitions not connected with Australia.
• Asset acquisitions: Where the acquisition is of an asset instead of shares, substitute the Australian revenue of the target to the acquisition (i.e. the vendor of the asset) to the extent that it is attributable to the asset, to determine whether the relevant tests are met. For example, where an Australian manufacturer is selling only one of its (several) factories, the Australian revenue to be included in the calculation is the revenue attributable only to that factory. To the extent that it is not reasonably practicable to attribute the Australian revenue of a target to an acquisition of an asset, the amount to be included in this limb of the test is 20% of the market value of the asset. This fallback attribution may be particularly relevant for acquisitions of leases.

"Transaction value" refers to the consideration received or receivable for all the shares and assets being acquired; or to the sum of the market values of all the shares and assets being acquired. If either of these is ≥ $250 million, this limb is satisfied.

• In an acquisition of shares in the capital of a body corporate, if the acquirer already has control of the Target prior to the acquisition (including joint control), or does not have control after the acquisition, the acquisition is not individually notifiable (also known as the "control exemption"). Put differently, if an acquisition of shares results in the Acquirer obtaining control over the Target, notification will be required (if the acquisition meets the thresholds).
• Control refers to the capacity of one entity to determine the outcome of decisions about another entity's financial and operating policies. It is the practical influence that a person can exert (rather than the rights they can enforce) that is the issue. A practice or pattern of behaviour affecting a body corporate's financial or operating policies is relevant, even if it involves a breach of agreement or trust.
• Control is interpreted consistently with section 50AA of the Corporations Act 2001 (Cth) but amended to include joint control by associates; as well as provisions for special purpose vehicles and subsidiaries.

Acquisitions of land, entry into leases (and agreements for lease) may require notification if they meet the thresholds set out above. However, there are a number of exemptions that may apply in relation to land and leases.

Certain land acquisitions do not require notification. These include:

• lease extensions and renewals;
• acquisition of land for the purpose of developing residential premises;
• certain commercial property acquisitions by businesses primarily engaged in buying, selling, leasing or developing land, where the acquisition is for a purpose other than operating a commercial business on the land (unless that is ancillary to the primary purpose);
• "land entities" – acquisitions of interests in entities that only hold land assets, where certain conditions are met;
• subsequent acquisitions of legal or equitable interests in land where the same acquirer has previously notified the ACCC of an acquisition of an equitable interest in the same land (to avoid multiple notification of acquisitions that take place in several stages) where certain conditions are met;
• acquisitions of land development rights (including a right to develop or redevelop land, and rights to construct, refurbish, expand or subdivide existing land buildings) which would be exempt (under the other land exemptions) if the development rights were an equitable interest in land; and
• the leaseback component of sale and leaseback arrangements relating to land (typically used for financing or capital management purposes).

In addition to the various land exemptions noted above, there are a number of other important exemptions to notification.

These include carve-outs in relation to control; internal restructures; ordinary business transactions (other than acquisitions of land and patents); certain acquisitions of shares in Chapter 6 entities; various financial market arrangements and more.

Parties should seek legal advice before relying on any of these as they are highly technical.

• In addition to the general notification thresholds above, an acquisition will be required to be notified to the ACCC if it belongs to a class of acquisitions determined by the Minister.
• To date, this is limited to acquisitions by major supermarkets (Coles Group Limited and Woolworths Group Limited and their connected entities) of supermarket businesses and land for supermarket businesses (where it meets certain requirements).
• Control is not required in relation to supermarket acquisitions.