SOUTH AFRICA – As Shoprite jubilates advancing its proposed acquisition of Massmart’s units to the Competition Tribunal approval stage, concerned parties in the retail sector have emerged objecting the deal.
Appearing before the tribunal, retailers Pick n Pay and Spar, South African Commercial Catering and Allied Workers’ Union (Saccawu), among others voiced their concerns.
Shoprite plans to acquire 56 retail supermarket stores and 43 retail liquor stores operated under the brand names Rhino Cash & Carry, Rhino Liquors, Cambridge Food and Cambridge Food Liquor, 10 wholesale (Cash & Carry) stores, two wholesale liquor stores; and Massfresh, with two entities: a meat-processing plant facility and Fruitspot, comprising three processing facilities in Cape Town, Durban and Johannesburg.
The target businesses which were deemed to be loss-making, are active in the retail and wholesale trade of grocery, liquor, and associated items and are wholly owned and controlled by Massmart.
Pick n Pay said in its submissions that there were a host of bidders who expressed interest in these assets from the outset, reports IOL News.
If the process had been allowed to go its proper distance and if the sellers had considered other alternatives, there might have been a range of less anti-competitive alternative buyers for these assets.
The owner of Boxer chain of supermarkets said it also identified store overlaps should the merger be allowed.
It said in previous cases the Competition Commission made sure that there were 1.5km to 3km radius between the target stores.
“So what is the real extent of the store overlap? If you look at it on a 2km radius, there are about 53 overlaps and if you look at it on a 3km radius, there are about 55 overlaps…
“It appears to us that the commission’s assessment on 3km radii showed about 38 local areas… For which you would have combined shares above 35 percent,” Pick n Pay said.
Meanwhile, Spar said the merger would produce serious negative consequences for competition and there would also be employment losses if the merger was approved.
In its submission, it said, “The independent Spar retailers who will be most affected by Shoprite acquisition of the targeted stores have explained that if the merger is approved, they will likely suffer an impact on the turnover, have to retrain staff to cut costs and that they will face a real threat to the significant personal investments that they’ve made in those stores.”
This comes after the Competition Commission gave node to the R1.36 billion (US$78m) deal, recommending the Competition Tribunal to approve the sale.
Backing its decision, the Competition Commission said it could not compel businesses to keep non-performing stores open.
It said it had seen that there was an attempt by Massmart in 2021 to try to ramp up or turn around particular stores.
“We’ve tried to indicate that although the target businesses are loss-making, we haven’t certainly made the case that they are of no value to other participants.
“And of course, that is evident from the bidding process as well. What we have said is that there has been a process.
We have in our report also indicated that merging parties will choose the most anti-competitive outcome,” it said.
The commission said the seller, Massmart, indicated that they could not continue to sustain and carry these businesses, “and any other outcome would simply close (the loss-making stores), because that was the most commercially viable outcome”.
According to the commission, it made a call on recommending approval of the transaction based on what was the best outcome for a vulnerable group, which is the employees, and it’s also in the public interest.
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