FTI rescue needed permission but it was not requested
When financial investor Certares was set to take over travel company FTI, it was believed that the struggling business would be saved. However, the takeover deal announced in April never materialized, and FTI soon found itself bankrupt. Now, it appears that FTI's bankruptcy is causing many people to cancel their planned trips, just as their vacations seemed safe until the last minute.
According to a business magazine, neither the German Federal Cartel Office nor the European Commission received a merger notification in connection with the merger process. The Federal Cartel Office has confirmed this, stating that "no such project has been registered and therefore no review in the context of merger control has taken place." The European Commission also corroborated that "such a transaction has not been officially reported to the Commission in accordance with the EU Merger Control Regulation."
The German Federal Government was also unaware of the situation. When asked about the lack of a merger filing, the Federal Ministry of Finance stated that they were unaware that FTI and Certares had not filed a cartel procedure. The Federal Ministry of Economics deferred to the Federal Cartel Office.
In FTI's official announcement in early May, they claimed that the deal with Certares would be subject to "the usual regulatory approvals and conditions required for such processes," which typically refers to cartel control procedures. Reports at the time indicated that "the cartel authorities" would still have to approve the transaction. Neither FTI nor Certares have commented on the failure to file the requisite applications. Certares' consultancy firm, Herbert Smith Freehills, also refused to comment.
A merger of this size is typically subject to regulatory approval. Industry experts estimate that Certares' merger ambitions were likely serious. The company avoids addressing the question of whether it aimed for a merger. "Please understand that the Certares-led consortium cannot comment at this time," Certares responds.
Typically, such procedures, which are time-sensitive and involve a company's continuation and potential insolvency, are filed and processed promptly by the involved companies. The Federal Cartel Office confirms that such procedures often take place within a month in Germany and 25 working days at the European Union level.
The initial agreement between Certares and FTI involved an investment of 125 million euros to finance FTI's growth phase and digital transformation. At the time, approvals from competitors were required. The alleged ongoing cartel proceedings were cited as the reason for FTI's financial difficulties. However, neither the previous main shareholder, family Sawiris, nor the new investor, Certares, were reportedly willing to provide financial support. The German federal government also denied additional financial assistance for "fiscal, legal, and economic reasons."
Handelsblatt revealed that the financial support needed was not a one-time, two-digit million amount, but a weekly amount in that sum.
For the cartel office to review a merger, the acquirer and the target company must generate annual sales of 500 million euros worldwide, with one company generating sales of 50 million euros and the other 17.5 million euros in Germany. Given FTI's published sales revenue, it seems that the takeover was indeed subject to merger control. In the 2022/23 financial year, FTI generated sales of around 4 billion euros.
"Due to the merger control, FTI would not have entered insolvency, as the merger control would most likely have been unproblematic," says Maxim Kleine, a lawyer specializing in cartel law at Görg. "Blaming the authorities for a possibly delayed review would be 'very, very cheap.'"
FTI is believed to have debts of around 1 billion euros, with almost 600 million euros being Corona aid from the German Economic Stabilization Fund. Christian Lindner, the Federal Finance Minister, had already rejected a debt write-off in April. However, Certares allegedly wanted to achieve a debt haircut through third-party sales of the claims "at market value." A spokeswoman for the Federal Ministry of Finance confirmed on Monday that such sales of receivables would have been "the most advantageous option for the Federal Government," but that option is no longer available.
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Despite the initial agreement with Certares for a 125 million euro investment, FTI's bankruptcy was triggered due to the alleged ongoing cartel proceedings, which required regulatory approval due to FTI's substantial sales revenue. This situation has negatively impacted the tourism industry, as many tourists have had to cancel their planned trips with the tour operator FTI.
The insolvency of FTI is causing significant disruptions in the tourism industry, particularly for those who had booked trips through the affected tour operator. The lack of regulatory approval for the deal between FTI and Certares has left many travelers in limbo, leading to the cancellation of their vacation plans.
