Canon May Face $2.9 Billion Fine Over Toshiba Merger Violation.
Canon has landed in murky waters and is now facing a fine of up to 10% of annual revenue from the European Commission over a Toshiba medical imaging business deal. If you are wondering how much is 10% of the annual revenue of a giant company like Canon….it is a lot. Canon reported $29.3 billion in sales during the fiscal year 2016, therefore the company is looking at a fine of about $2.9 billion.
According to the EC, Canon used what is known as “warehousing“, a two-step deal process to take over Toshiba Medical Systems before securing approval for the merger. The total value of transaction of this deal was somewhere around the ball-park of $6 billion.
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“In the first step, the EC said, an interim buyer picked up 95% of Toshiba Medical Systems shares, while Canon bought the remaining 5%. Canon also paid for options over the interim buyer’s stake. In the second step, Canon exercised its share options, thereby acquiring 100% of the shares.” – reported Fierce Biotech.
The European Commission has issued complaints to three other companies, namely Merck, KGaA and GE. These companies maybe fined up to 1% of global sales for failing to provide information or giving misleading information according to Bloomberg.
“We need companies to work with us to ensure fast and predictable merger control, to the benefit of both companies and consumers,” said Commissioner Margrethe Vestager in the statement. “But we can only do our job well if we can rely on cooperation from the companies concerned—they must obtain our approval before they implement their transactions and the information they supply us must be correct and complete.”