Still on the Merger and Acquisition series.
Intermediate and Large Mergers
An intermediate merger is a merger between  the lower threshold[1]and the upper threshold. Under the extant Investment and Securities Act 2007[2](”ISA”), it is the merger of companies with a threshold of turnover between five hundred million and five billion. But as we pointed out earlier under the new Securities Exchange Commission (SEC) Rules 2010 (as amended), the threshold for intermediate mergers  is now between two hundred and fifty million and five billion.
A large merge is a merger above the upper threshold. Under both the ISA 2007 and the extant SEC Rules, the upper threshold is set at above five billion of the combined assets or turnover of the merging companies. 
Unlike small mergers, notification for intermediate and large mergers is compulsory under Nigerian law.[3] But under the SEC, the parties must first send a pre-Merger notice to SEC. then the parties will then apply to the court for separate court ordered meetings of the companies intending to go into a merger. This meeting is for the purpose of giving their shareholders notice of the merger and an opportunity for them to approve or object to it. If a majority of at least three-quarters of the mergers approve the scheme, it is then sent to SEC for formal notification.[4]
After notifying SEC the merging parties must each provide a copy of the merger scheme to any registered trade unions or representatives of its employees. For example where it to be a company in the oil and gas sector, the scheme must be made available to PENGASSAN (Petroleum and Natural Gas Senior Staff Association of Nigeria) and NUPENG (Nigeria Union of Petroleum and Natural Gas Workers).[5] The merging parties are required to pay a notification fee of Fifty Thousand Naira.[6]SEC will then investigate the merger or appoint an external inspector to investigate the merger.[7]The parties cannot implement the merger until it has been approved by SEC with or without conditions. Within twenty working days (for intermediate mergers) or forty working days (for large mergers), SEC must come to a decision.[8]Note that in the case of an intermediate merger, the period within which SEC reaches a decision can be extended by it to forty working days. In which case it will issue a Certificate of Extension. The Act does not provide for an extension period for large mergers. During consideration of the merger, SEC  refers the merger notice the Federal High Court. After considering the merger in accordance with Section 121 of ISA[9]SEC will issue its decision whether it approves the merger, approves it with conditions or prohibits same. If SEC approves the merger  (or does so with conditions), one the merging parties (through their appointed solicitors) will apply to the Federal High Court to sanction the merger. Apart from sanctioning the merger the court can make other consequential orders. The companies affected by the merger, in compliance with the SEC Rules, will then send a copy of the court order to SEC for registration within seven days and public a notice of the order in the Official Gazette of the Federation and in at least one national newspaper. Then finally, the companies will notify SEC that the merger process has been completed.
It is curious to note that even after the completion of the merger, SEC has power to still break-up the company back into separate entities where for example it finds out that the business practice of one of the companies substantially lessens competition or just for the sake of public interest.[10]
The procedure for intermediate and large mergers may seem cumbersome, but their effects are also cumbersome on the capital market and the economy at large. As such a well detailed and ‘cumbersome’ process is imperative. Also one need not forget that these kind of mergers can sometimes have a direct or indirect impact on competition in their sector of the economy. There is a danger of them resulting in a kind of monopoly. Hence, the anti-competition provision in Sections 121, and 128 other parts of the ISA is handy to help cushion this danger. It is our hope that the professionals at SEC will not to increase the cumbersomeness of the already cumbersome process.

[1]We have defined threshold in our previous posts.
[2]Act No. 29 of 2007.
[3]Section 123 of ISA.
[4]Rule 233 of SEC Rules.
Where the merger scheme does not get the required support from the members of the company, it dies a natural death. Alternatively, the company in question can explore the provision of Section 129 of ISA, by acquiring the shares of the dissenting mergers.
[5]Section 123(2) of ISA.
[6]SEC RULES 232A.
[7]Section 124 of ISA. This is similar to Central Bank of Nigeria’s power to appoint external investigators, under Banks and Other Institutions Act, to investigate banks who may be failing .
[8]Section 125 and 126 of ISA.
[9]The competition regulation Section.
[10]Section 128 of ISA and Rules 234(3) of SEC Rules.

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Nigerian Law Today

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