SOUTH AFRICA – The Competition Commission of South Africa has recommended the Competition Tribunal give the green light to the US$1.7 billion (R25.52bn) transaction that will see Simba, a PepsiCo subsidiary take over Pioneer Foods whose food staple brands include Sasko, Weet-Bix, Liqui-Fruit and Ceres.
In July, PepsiCo, which distributes well-known brands that include Lays, Dorito’s, NikNaks and Fritos through Simba, unveiled its plans to take over Pioneer Foods, saying it wanted to create Africa’s leading beverage company led from South Africa.
The company promised to support the country’s economic empowerment fundamentals, employment and also boost local suppliers.
PepsiCo said the move was a step towards achieving its growth ambitions on the continent, adding it would gain a solid beachhead for expansion into Sub-Saharan Africa by enabling scale and distribution.
It also announced it would acquire Pioneer Foods shares for R110 a share or $1.7bn (R25.52bn), saying the deal would be funded through a combination of debt and cash. In October, the deal was approved unanimously by shareholders.
According to the Commission, the proposed deal will result in “significant public interest benefit for South Africa”, and is unlikely to result in a substantial prevention of lessening of competition in any relevant markets.
It recommended that the Tribunal approve the merger, subject to several public interest commitments including a moratorium on retrenchments for a certain period, as well as the creation of jobs at the merged entity.
“The proposed transaction, which will result in significant public interest benefit for SA, including the transfer of at least R1.6bn (US$108m) in equity to workers, is unlikely to result in a substantial prevention or lessening of competition in any relevant markets,” the commission said on a statement.
The commission also wants “significant investment in the operations of the merged entity, the agricultural sector and the establishment of an enterprise development fund.” What the enterprise fund is for and how much it will cost was also not disclosed.
Eugene Willemsen, CEO of PepsiCo sub-Saharan Africa, said in 2019 the purchase of the SA food company represented “a significant step in expanding our footprint in sub-Saharan Africa”.
“PepsiCo and Pioneer Foods are committed to scaling our business across the African continent with a locally relevant product portfolio,” Willemsen said. “Together, we have a shared vision for building a more sustainable future for Africa.”