Tyco International Ltd. planned to conduct an offshore merger with CIT Group, Inc., by which Tyco would obtain indirect control of CIT Group's Chinese Taipei subsidiary, and therefore applied to the Fair Trade Commission for approval of merger
Case:
Tyco International Ltd. planned to conduct an offshore merger with CIT Group, Inc., by which Tyco would obtain indirect control of CIT Group's Chinese Taipei subsidiary, and therefore applied to the Fair Trade Commission for approval of merger
Key Words:
business operations, appointment or discharge of personnel, approval of a merger
Reference:
Fair Trade Commission Decision of May 31, 2001 (the 499th Commissioners' Meeting); Decision (90) Kung Chieh Tzu No. 512
Industry:
Medical Instruments and Devices (3330)
Relevant Law:
Article 12 of the Fair Trade Law
Summary:
1. This case related to the offshore merger of the Bermuda-based Tyco International Ltd. (Tyco) and US-based CIT Group, Inc. (CIT), the result of which was that Tyco would obtain indirect control of CIT Group's Chinese Taipei subsidiary. Tyco and CIT, pursuant to Article 6(1)(i) and 6(1)(v) of the Fair Trade Law (FTL), sent an application for merger approval to the Fair Trade Commission (FTC). The application was first reviewed by the undertaking unit of the FTC who determined that Article 6(1)(i) "merges with another enterprise" and 6(1)(v) "directly or indirectly controls the business operation or the appointment or discharge of personnel of another enterprise" of the Law were both applicable to the application. 2. Tyco and CIT planned to carry out an offshore merger. To accomplish the merger, Tyco intended to establish a wholly owned subsidiary Tyco Acquisition Corp. XIX (NV) (Tyco Acquisition). Tyco Acquisition would first purchase 71 million shares of CIT common stock from Dai-Ichi Kangyo Bank, or 27.1 % of total CIT shares. Tyco Acquisition would subsequently conduct a stock swap merger with CIT, exchanging each share of CIT stock for 0.6909 of a Tyco share, and leaving Tyco Acquisition as the survived company. The participating enterprises were all offshore companies, and the merger would be carried out offshore. However, an ancillary effect of the merger would be the transfer of indirect control of the business operations and personnel decisions of CIT's Chinese Taipei subsidiary, Taiwan Newcour Capital Ltd. (Taiwan Newcour), to Tyco. Because Tyco's sales revenue for the preceding financial year reached the threshold of NT$5 billion at which enterprises were required to apply for approval of a merger, Tyco, according to Article 11 of the FTL, filed an application for merger with Taiwan Newcour. 3. Assessment of the merger's impact on domestic economy: Tyco was a manufacturing company with diversified interests of which included five major areas such as electronics, telecommunications, medical equipment, instruments, and other professional products, firefighting and security services, and flow control equipment. CIT's main business areas were financing and leasing services. In Chinese Taipei markets the two enterprises were free competition ones. Because there was no overlap of business operations between the two enterprises, the merger would not have any adverse effect on Chinese Taipei's overall economy or on the competitive structure of relevant markets. Neither would the merger introduce adversely restrain or impede competition. Through merger with CIT, Tyco would be able to increase its capital utilization efficiency and cash flow capacity, which would decrease operating costs. Furthermore, the merger would expand the new company's scope of client services, and raise the quality of client services. Moreover, absorbing CIT's operational foundation and experience in the products and services operated by CIT would allow Tyco to rapidly establish a foothold in another industry, to expand the types of goods and services offered, and to achieve greater diversification. 4. In summary, this merger would not have any obvious negative effects on the competitive structure of relevant markets, and the potential overall economic benefits would outweigh restraints on competition. Consequently, the application was approved according to Article 12 of the FTL. Summarized by Chung, Yee-Shaun; Supervised by Shih, Gin-Tsun