May 2025 – On 4 April 2025, the European Commission issued its long-awaited decision regarding the e&/PPF case, following an in-depth Phase II investigation that ultimately led to the adoption of commitments. The transaction concerns the 50%-plus-one-share acquisition by Emirates Telecommunications Group Company P.J.S.C. (“e&”) of PPF Telecom Group B.V.’s (“PPF Telecom”) telecommunication network and infrastructure businesses in Slovakia, Hungary, Bulgaria, and Serbia.
The decision addresses key elements such as the concept of foreign subsidies and the distortion of competition, offering valuable guidance on how the Commission approaches merger reviews under the Foreign Subsidies Regulation (“FSR”). The decision not only demonstrates the importance of a thorough assessment of the financial contribution for non-EU state-related undertakings and entities, such as sovereign wealth funds and non-EU governments, but is also of paramount importance for private equity investors. Although there have been no rejections under the FSR regime so far, private equity firms, mainly from the US and the UK, account for around a third of all FSR notifications, with the main sectors under review being financial services, consumer, energy, industrials, and transport.
1. Findings on foreign financial contributions, distortion, and commitments
The concentration met the thresholds for review under FSR, as the EU-established target generated turnover of EUR 1.8 billion—well above the EUR 500 million threshold—and both e& and the target had received combined foreign financial contributions (“FFCs”) exceeding EUR 50 million from third countries within the three years preceding the transaction.
The transaction was conditionally approved on 24 September 2024, following its notification on 26 April 2024, after several requests for information (“RFIs”) and consultations with a number of market participants.
1.1 Assessment of different forms of FFCs
One important aspect of the decision was the Commission's clear assessment of the different forms of FFCs that were granted from the United Arab Emirates (“UAE”) in the form of:
- an unlimited guarantee to e& directly granted by the UAE government;
- a term loan granted to e& by a consortium of banks comprised mainly of UAE-controlled banks (four state-controlled and one private institution);
- direct grants, loans and repayable advances to Emirates Investment Authority (“EIA”), the UAE’s sovereign investment fund, from the UAE Ministry of Finance;
- a revolving credit facility loan to the EIA by a consortium of UAE banks (some of which are state-controlled banks);
In a nutshell, the term loan did not constitute a benefit, as it was comparable to other financing arrangements obtained by e& and similar transactions. In contrast, the European Commission found the unlimited guarantee to be problematic, as it enhanced e&'s creditors' expectations that their financial claims would be honoured, thus constituting a benefit. Further, financial contributions were also deemed to be foreign subsidies after several RFIs were sent to e&, for which the Commission did not receive satisfactory responses regarding the contributions received by the EIA. Based on the available facts, the Commission concluded that these grants were subsidies, as the ownership structure of the banks indicated that they were controlled by the UAE.
1.2 The notion of distortion
The decision further reinforces the goal of the FSR to protect the internal market from distortion and to ensure a level playing field. While some parallels can be drawn with EU state aid rules, which aim to maintain a level playing field within the internal market, the FSR test goes beyond that. It mandates a two-step approach to identify distortion: (i) the foreign subsidy must improve the competitive position of an undertaking in the internal market—similar to state aid law—and (ii) in doing so, it must actually or potentially negatively affect competition in the internal market, which represents a clear departure from the state aid framework. Notably, the decision distinguishes between (i) competition in the acquisition process between e& and other potential bidders, and (ii) competition in the EU market after e& had acquired PPF Telecom.
While the acquisition price aligned with fair market value, suggesting no distortion in the bidding process, the Commission found that the unlimited guarantee could distort competition post-transaction. It would enable the combined entity to access financing at lower rates and take greater strategic risks than competitors, thus distorting market dynamics. The Commission also conducted a balancing test. However, only positive effects related to financial distribution could be considered, and no positive effects arising from the transaction were considered in the balancing test.
1.3 Commitments and procedural aspects
To address the above-described concerns, e& offered commitments to eliminate distortive effects. These included:
- removing the unlimited guarantee, restricting e&'s ability to provide financing to PPF Telecom;
- not financing the EU businesses of the target, subject to certain exceptions;
- agreeing that transactions between the EU businesses of the target and e& and its affiliates take place only on market terms; and
- appointing a monitoring trustee to ensure compliance with the above commitments.
Relying on the market test and its own analysis, the Commission provided feedback to e&, identifying certain unclear and improvable provisions. In response, the parties submitted their "Final Commitments" in August 2024, approximately one month after the initial submission. Had commitments not been offered, the Commission would have considered redressive measures.
2. Key takeaways
While the decision has provided clarity in certain aspects of FSR, more decisions will need to follow to provide more thorough guidance. Nevertheless, the following key takeaways are made clear by the decision:
- Plan ahead: With a median of 100 days from deal announcement to FSR notification, the process can significantly delay deal timelines. Therefore, ensure that appropriate contractual cooperation clauses and suitable long stop dates are negotiated.
- Be vigilant during the acquisition process: The Commission may actively assess whether the purchase price reflects market value. Be aware that the Commission may request internal documents as part of the review process.
- Thoroughly assess financial distributions: Even indirect or implicit forms of support—such as an unlimited state guarantee—can trigger FSR scrutiny, particularly if state-related entities or sovereign wealth funds are involved.
- Provide comprehensive information: Failure to do so may result in the Commission making assessments based on the available facts, which could lead to a less favourable outcome.