KKR deal jeopardised by court ruling

KKR’s E5.1bn acquisition of French electronics firm Legrand has been thrown into question following an annulment of the original blocking of the Schneider-Legrand merger in 2000.

KKR’s acquisition of Legrand, Europe’s largest ever LBO, hangs in the balance after a European court dismissed the Competition Commission’s rejection of Schneider Electric’s acquisition of Legrand two years ago.

 

The European Court of First Instance, the court of appeal for decisions made by the European Competition Commission, has said that the original deal only posed competition issues within Legrand’s domestic French market and should not have been rejected in its entirety on that basis.

 

The ruling also states that the Commission infringed Schneider’s defence rights to allow the company ‘to propose solutions to the problems identified and to make its defence known before the Commission adopts a final decision.’

 

According to a court spokesperson, the Commission must now decide whether to accept or commence new proceedings against the merger. The Commission could also be subject to a fine from the court, although Elaine Gibson Bolton, competition partner at SJ Berwin, said a direct claim for compensation by Schneider was unlikely.

 

Schneider has yet to make a statement over its response to the ruling, saying only that it noted ‘with satisfaction’ the verdict and that it will examine the consequences of the ruling in due course.

 

At the time of completion of the sale to Wendel Investissements and KKR, a proviso was inserted into the deal that Schneider could withdraw from the sale subject to a E180m payment to the purchasers.

 

KKR has so far declined to comment on the ruling, which jeopardises the centrepiece of the firm’s recent European activity. The firm has been active in the European market over the last year, recently acquiring several industrial assets from Siemens for E1.7bn.