SOUTH AFRICA – The Competition Tribunal of South Africa has conditionally approved the proposed acquisition of milk procurement business Dairy Farmers of South Africa (DFSA) by branded consumer goods company Clover SA.
Clover manufactures and supplies dairy products, soy products, olive oil, peanut butter and mayonnaise. It also produces non-alcoholic beverages.
Meanwhile, DFSA procures regular raw milk from milk producers predominantly located in KwaZulu Natal, Eastern Cape, and the Highveld.
Its operations include buying milk from farmers, transporting raw milk from farmers to the factories for cooling down, quality checks, as well as administrative, financial and contract management services.
The conditions imposed on the merger include commitments relating to employment, training and skills development, enterprise development, procurement contracts and raw milk supply.
Regarding employment, the Tribunal has directed there will be no merger-related retrenchments during a five-year moratorium period.
In addition, current permanent employees of the milk procurement business will be transferred to Clover in line with the provisions of the Labour Relations Act.
Their employment terms and conditions will be no less favourable than those that existed between themselves and the DFSA.
The conditions also provide for financial commitments by Clover relating to enterprise development and training and skills development.
On milk procurement contracts with relevant suppliers, Clover will maintain existing milk procurement contracts with current suppliers.
This will be for a period of five years from the merger implementation date, provided that the suppliers continue to supply regular raw milk to Clover at market-related prices.
These suppliers comprise SME and HDP milk producers with which DFSA has milk procurement contracts.
If any supplier increases its price per litre of regular raw milk above market-related prices, Clover will be entitled to terminate its contract with the supplier.
Clover will also make available, to its competitors, regular raw milk that is surplus to Clover’s own requirements at market-related prices.
DFSA was initially a full subsidiary of Clover but was later split, with its milk producers allotted a 74% stake while Clover retained a stake of 26%. The company finally disposed of its remaining investment to the Milk Producers Trust in May 2020.
The entity was split from Clover as part of the milk producer’s effort to drive more volumes of raw milk to increase profitability. It also sought to streamline the business, and to focus on its value-added offering.
Clover SA has subsidiaries across South Africa, Botswana, Namibia, and eSwatini and operates in various manufacturing facilities across Gauteng, the Free State, KwaZulu-Natal, the Eastern Cape and the Western Cape, and has an extensive network of distribution warehouses and fleets throughout South Africa.