Merger Controls First Edition - J Sagar Associates

Webber Wentzel South Africa
imposed or merging parties are required to give undertakings to limit job losses, undertake re-skilling of retrenched workers
and the like. Moratoriums on retrenchments for a period are also becoming common. Thus in the merger of Momentum
Group Limited and Metropolitan Holdings Limited last year (41/LM/Jul10), although there were no competition concerns,
stringent conditions were imposed to deal with employment concerns. The competition authorities also pay close heed to
the concerns of trade unions. Trade unions are entitled by law to participate in the merger process, and they are exercising
their rights more and more vigorously, to the extent that they seek to give input even where their members are not affected
by a merger.
The competition authorities formerly fell under the Department of Trade & Industry, but in the last year oversight moved
to the portfolio of the newly-created Department of Economic Development. Since then greater attention has been paid
not only to employment, but also to other public interest considerations. Indeed in a policy document issued by the
Department of Economic Development, it is stated that more consideration should be given to the possibility of imposing
public interest conditions in mergers. The Minister is entitled to participate in mergers in order to make representations
on public interest grounds, and he appears to be exercising that right more vigorously. Thus in the intermediate merger
where the Japanese company Kansai Paint Co. Limited (“Kansai”) acquired the South African company Freeworld Coating
Limited (“Freeworld”), the Minister expressed his views on the transaction and the Commission ultimately approved the
transaction only subject to a number of conditions. Aside from a divestiture condition imposed to alleviate competition
concerns, and an employment condition precluding retrenchments for a period of three years, Kansai was required: to
continue to manufacture decorative coatings for ten years; to establish an automotive coatings manufacturing facility in
South Africa within five years; to invest in South African research and development in decorative coatings; and to
implement an empowerment transaction involving formerly disadvantaged persons within two years. These public interest
conditions are wide ranging and far more extensive than have been seen previously.
The most prominent recent transaction dealing with public interest involves WalMart Stores Inc, which has acquired a
majority stake in Massmart Retail Holdings Limited (73/LM/Nov10). The transaction raised no competition concerns,
but trade unions intervened in the large merger hearing, and several South African Ministries, including the Department
of Economic Development and Department of Trade & Industry also participated to air their views. The gainsayers, who
were particularly worried that the acquisition would result in Massmart substituting imports for locally produced products
and the effect this would have on local suppliers and their employees, sought the prohibition of the transaction. After a
lengthy and very public hearing the Tribunal found that many of the concerns raised by interveners did not fall within the
competition arena and therefore could not be resolved by the Tribunal. After careful consideration they approved the
transaction subject to certain conditions which had been proposed by the merging parties. Although the transaction was
approved, the unions and the government departments are taking the matter further, and we have therefore not heard the
end of this saga.
Global Legal Insights ­ Merger Control First Edition
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