Wealth management expert - FTI Bankruptcy: The Unexplained Disappearance of Antitrust Trials
The collapse of the travel agency FTI has left numerous people with cancelled trips, despite it seeming like the heavily indebted travel provider might be saved. In mid-April, American financial investor Certares announced their plans to take over Europe's third-largest travel agency. However, this deal has hit a snag - media reports suggest that this was also due to an ongoing cartel investigation.
However, no request for review has been submitted to the Federal Cartel Office or the European Commission in relation to the merger control. Without this, the takeover process would not have begun. According to the Federal Cartel Office, "no such project has been registered and therefore no review in connection with the merger control is taking place." The European Commission also confirmed, "This transaction was not officially reported to the Commission in accordance with the EU Merger Control Regulation."
The German Government appears to be unaware of this development. The Federal Ministry of Finance responded to an inquiry saying they had no knowledge that FTI and Certares had never requested a cartel investigation. The Federal Ministry of Economics simply referred to the competent Federal Cartel Office.
In their official announcement in early May, FTI stated that the deal with Certares would be subject to "the usual regulatory approvals and conditions required for such transactions." This usually refers to cartel review procedures. Several media also reported at the time that "competition authorities" would still have to approve the deal. Neither FTI nor Certares were willing to comment on the apparent lack of application. The Certares consulting law firm Herbert Smith Freehills also declined to comment.
Stringent control procedures are usually processed quickly
A merger of this scale is estimated by experts to be subject to control. How serious were Certares' takeover intentions then? The company remains tight-lipped. "Please understand that the consortium led by Certares cannot comment at this time," the US company tells Capital.
These review procedures, which are time-critical and concern the survival and imminent bankruptcy of a company, are usually filed and processed quickly. The Federal Cartel Office confirms this to Capital. Such procedures have already been approved within a few days. In Germany, the time from the official filing to the approval of "unproblematic mergers" is one month, in the EU 25 working days. The process could have taken place within these days.
Certares planned to invest 125 million euros in FTI, according to the agreement of April 12, to finance the next growth phase and digital transformation of the company. The competition authorities had to approve the deal, it was said at the time. The ongoing cartel investigation was cited as the reason for FTI's serious financial problems. The highly indebted travel provider allegedly needed money to cover the summer until the deal was supposed to be completed.
However, the previous main shareholder family Sawiris, and the new investor Certares, were not willing to provide financial support. The federal government also rejected further financial aid for "budgetary, legal, and economic reasons." It wasn't just about a one-time two-digit million sum as previously assumed, but about needing funds on a weekly basis.
Whether a merger of companies on a federal or EU level is examined depends on the turnover of the companies. For the Federal Cartel Office, a registration is required if the acquirer and target company generate a combined worldwide turnover of 500 million euros, with one of the companies generating sales of 50 million euros and the other of 17.5 million euros in Germany. For the jurisdiction of the European Commission, the turnover threshold is even higher.
The merger control of FTI would have been "unproblematic"
Given the publicly known turnover of the involved companies, it's clear that the takeover of FTI was subject to merger control. FTI alone generated a turnover of around 4 billion euros in the 2022/23 business year.
"Due to the merger control, FTI would not have gone into insolvency, as the merger control should have been unproblematic," says cartel law expert Maxim Kleine. "FTI may have gone into insolvency because the buyer did not want to put any money into the company before the approval." Blaming the authorities for a possibly delayed review would be "very, very cheap."
FTI is said to have debts of around 1 billion euros, with almost 600 million euros coming from Corona aid from the Economic Stabilization Fund of the Federal Government. Federal Finance Minister Christian Lindner (FDP) had already rejected a debt write-off in April. It appears that Certares were trying to make a debt cut through the back door by selling the claims "at market value" to third parties. Now this option no longer exists.
Read also:
- The ongoing antitrust proceedings against FTI might have been a factor in Certares' decision to back out of the takeover, leading to the travel agency's insolvency.
- Under antitrust law, a merger between a heavily indebted company like FTI and a potential buyer like Certares would typically require a review by the Federal Cartel Office or the European Commission.
- The absence of a request for review from FTI or Certares in relation to the merger control has delayed the takeover process, potentially contributing to FTI's financial instability.
- The FTI Group's insolvency has disrupted travel plans for many customers and raised questions about the role of antitrust law in protecting the competitive landscape of the travel industry and tourism.
