The Coca-Cola — Chivita Case Study: A Merger or An Acquisition

In 2016 Coca-Cola acquired a 40% stake in Tropical General Investments Group, the holding company of Chi Ltd (founded in 1980) and as planned, has recently acquired full ownership of the company.

Some legal pundits still refer to Coca Cola — Chi business restructure as a Merger, but there exist a thin line between Mergers, Acquisition and Takeovers. What’s the distinction you ask?

While global practice obviates the distinction between Mergers, Acquisition & Takeovers (MAT), the Companies and Allied Matters Act (section 338) Investment and Securities Act 2007 (Section 117) and the Securities & Exchange (Consolidated) Rules 2013 (Rules 421 and 433) defines MAT as follows:

Merger — the amalgamation of two or more distinct business entities/undertakings (which involves a court order).

Acquisition — the purchase of a controlling stake (most, if not all the holdings) in a private company

Takeover –the purchase of a controlling stake in a public company which entails a mandatory bid process.

Under the Nigerian law, an amalgamation of business entities/undertakings occurs only in a merger which makes way for a single and new distinct entity where the court plays a significant role.

From the above, it is glaring that Coca Cola acquired the controlling stake in Tropical General Investment Group and does not further result into a single, new and distinct entity.

What’s the Implication of an Acquisition?

The whole concept behind an acquisition is that the acquiring company, in this case Coca Cola acquired major shares in the target company, Chi Ltd, backed up by an agreement to purchase its controlling stake, which resulted into a Holding — Subsidiary relationship between Coca Cola and Chi without the intervention of the Court. This implies that Coca cola resumes operational and structural control of Chi Limited.