Metair Investments slapped with R400 million EU fine for anticompetitive behavior

Metair Investments is being fined R400 million by the European Union for uncompetitive behaviour after an investigation that started 7 years ago was concluded.

The JSE-listed manufacturer of automotive components said Monday that its 100% owned Romanian battery making subsidiary, Rombat S.A., had, on December 15, 2023, been levied a fine of €20.2m (about R398.1m) by the European Commission, after the Commission had concluded that Rombat had contravened EU competition law.

The Commission also found that Metair and its Dutch subsidiary, Metair International Holding Cooperatief UA, were jointly and severally liable for a portion of the fine, amounting to €11.6m, based on a legal presumption under EU law of parental liability, in that they exercised decisive influence over Rombat since its acquisition on March 14, 2012.

The Commission's findings conclude an investigation that was launched in 2018 and spanned 7 years. It targeted the activity of several automotive battery manufacturers in the European industry, including Rombat, as well as the European battery manufacturers association, EUROBAT.

The investigation covered the period 2004 to 2017. The probe was based on an Information Bulletin published quarterly by EUROBAT, which used statistical data provided by EUROBAT members at the association's request.

The Commission found that the manufacturers had exchanged commercially sensitive information to determine the surcharge price element of automotive starter batteries sold to Original Equipment Manufacturers.

Metair's directors said they refute the decision by the Commission regarding the legal presumption that it exercised decisive influence over Rombat in this matter."

The key decisions regarding the implementation of the EUROBAT premium had already been firmly established by the time Metair acquired Rombat in 2012 and were not identified during the due diligence process carried out by external advisors," Metair's directors said.

They said the fine is likely to have serious financial implications on Rombat's operations, and Metair and Rombat's boards are considering the Commission findings, including an assessment of legal options, and the extent to which the fine may be enforceable against Metair.

In addition, the board will evaluate the impact of the obligations of the South African obligor debt package, concluded by Metair.

"Rombat continues to drive its current operations according to the strategy agreed with Metair and remains committed to its business objectives," Metair's board said.

Rombat is a leading company in Bistrita-Nasaud County. It is one of the largest regional employers and a key contributor to Romania's annual state budget.

The Commission had agreed that the fine may be paid over 51 months with a first instalment of €4.2m due within 3 months from December 15, 2023. Interest would be levied on the instalments to the payment date at an interest rate applied by the European Central Bank plus 1.5 percentage points.

Metair's share price traded 3.69% lower to R4.20 on Monday afternoon, while the JSE All Share Index was higher by 0.17%, this after news of the fine percolated through the market. Metair's share price has fallen substantially from R10.63 over a 12 month period.

Two months ago, Metair reported a 53% increase in revenue to R8.66 billion for the six months to June 30, 2023, on a continuing business basis, operating profit before capital items increased by 27% to R450m, while group headline earnings per share (HEPS) came to 65 cents, a turnaround from the 3 cents a share loss reported in the first half of 2022.

The big turnaround was mainly due to losses at Turkish battery manufacturer Mutlu Akü, which was sold at the end of 2022, whereas interim HEPS from continuing operations decreased by 8% to 71 cents per share from 77 cents the previous period.

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