Anticipated acquisition of Perpetuus Group: notification of Phase 2 reference
Published 12 May 2022
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This publication is available at https://www.gov.uk/government/publications/anticipated-acquisition-of-perpetuus-group-by-shanghai-kington-technology-limited-and-others/anticipated-acquisition-of-perpetuus-group-notification-of-phase-2-reference
1. Further to his letter of 31 March 2022 setting out that the Secretary of State for Business, Energy and Industrial Strategy was minded to make a reference to the Competition and Markets Authority in relation to the proposed acquisition of Perpetuus Group by Taurus International Ltd and others, I can now confirm, for the reasons set out below, that the Secretary of State has decided to make a reference under section 45(5) of the Enterprise Act 2002 (“the 2002 Act”). In doing so, the Secretary of State has considered carefully all responses.
2. The Secretary of State believes that it is or may be the case that:
a. arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation. Having considered the Competition and Markets Authority report, and in accordance with section 46(2) of the 2002 Act, the Secretary of State accepts the decision of the Competition and Markets Authority on this issue;
b. the public interest consideration mentioned in the intervention notice issued on 5 September 2021 (the interests of national security) is relevant to a consideration of the relevant merger situation concerned;
c. taking account only of the relevant public interest consideration concerned, the creation of the relevant merger situation may be expected to operate against the public interest.
3. The Secretary of State has today issued the enclosed reference to the CMA.
Relevant merger situation
4. The Competition and Markets Authority believes that Perpetuus Group and Shanghai Kington Technology Limited are enterprises that would cease to be distinct as a result of the acquisition, and that the turnover test under section 23(2A)(b) of the 2002 Act is met . Accordingly, arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.
5. In accordance with section 46(2) of the 2002 Act, the Secretary of State must accept the decision of the Competition and Markets Authority on this point.
Substantial lessening of competition
6. The Competition and Markets Authority has concluded that the proposed acquisition does not give rise to a realistic prospect of a substantial lessening of competition within a market or markets in the United Kingdom and that the test for reference is not met on competition grounds.
7. In accordance with section 46(2) of the 2002 Act, the Secretary of State must accept the decision of the Competition and Markets Authority on this issue.
The interests of national security
8. The Secretary of State notes the advice provided by the Ministry of Defence. This advice identified a number of potential risks to national security arising from the proposed acquisition.
9. The Secretary of State notes the third-party views provided to the Competition and Markets Authority set out in its report and further information from other government departments and a small number of third parties.
10. The Secretary of State notes and has carefully considered any information you have provided in response to our requests for information. However, he did not consider that any information presented fundamentally altered his assessment that national security concerns remain a relevant consideration of the transaction.
11. Taking account of this information, the Secretary of State believes that there are national security concerns arising from the merger. As such, he believes that the following risk to national security may be generated from the transaction:
a. Transfer of goods and technology with potential military applications
12. The Secretary of State therefore continues to believe that it is or may be the case that the interests of national security are relevant to a consideration of the proposed acquisition.
Undertakings in lieu
13. The Secretary of State has received no proposed undertakings from you to date.
14. I am copying this letter to Dr Zhongfu Zhou.