South Africa's Competition Tribunal approves Clover's R4.8 billion buyout
But the competition authority imposes a range of employment and procurement conditions.
The R4.8 billion acquisition of South Africa-based foods and beverages group Clover Industries by a consortium called Milco has been approved by the competition authority.
The Competiton Tribunal announced on Wednesday that it has approved the merger involving Milco SA and Clover subject to a range of employment, local procurement of bulk juice concentrate, and information sharing conditions.
The deal between Clover and the Milco was initially announced in February 2019, wherein a consortium led by Israel-based Central Bottling Company offered to buy 59.5 percent of Clover. The remainder of the shareholding would be held by investment holding company Brimstone Investment Corporation (15 percent) and executive management of Clover (6.3 percent).
However, Brimstone caved into pressure from a pro-Palestine activist group Boycott Divestment Sanctions South Africa, as it announced this month that it will no longer be participating in the deal.
The tribunal has put a three-year moratorium on retrenching 516 workers, it said on Wednesday, noting that that number had also been subsequently lowered to 277 planned job losses.
The tribunal initially had concerns that the merger would result in 516 workers being retrenched related to the completion of Project Sencillo, a Clover project underway to ensure the better utilisation of its assets (factories, production lines, warehouses and trucks), the completion of which is expected to take up to five years. “The merging parties further tendered to not retrench any employees as a result of the completion of Project Sencillo for a period of two years from the implementation date of the proposed merger,” the Tribunal said.
The tribunal raised the moratorium to three-years, further noting that the merging parties had said 550 new permanent positions would be created by the merged entity over the next five years.
Unions at Clover — the General Industries Workers' Union and Inqubelaphambili Trade Union (ITU) — had opposed the merger plan.
They all raised concerns regarding the effects of the proposed transaction on employment in South Africa, specifically in relation to the planned retrenchments as a result of Project Sencillo.
To remedy concerns raised by certain South African suppliers to Clover of bulk juice concentrate, the merged entity agreed to, for three years from the implementation date of the transaction, continue to procure its required volumes of bulk juice concentrate from local suppliers.
The tribunal initially had certain concerns with the merging parties’ formulation of the proposed local procurement remedy that in the tribunal’s view would have made the proposed remedy ineffective. However, the merging parties redrafted the condition and that cured the tribunal’s concerns.