Tribunal conditionally approves merger of South Africa’s ostrich processing giants

SOUTH AFRICA – The Competition Tribunal has approved the merger between the biggest ostrich processing companies, Klein Karoo International (KKI) and Mosstrich.

The companies supply ostrich slaughter and ostrich feather-related services to ostrich farmers and tannery services for ostrich skins. Ostrich meat and feathers are largely exported.

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The parties currently have abattoir facilities in Oudtshoorn, Mossel Bay, De Aar and Graaff-Reinet and tannery facilities in Mossel Bay and Oudtshoorn.

As part of the conditions of the merger, the tribunal noted that the new entity formed between the South African based companies must supply enough steak and feathers to the local market.

The Tribunal’s approval follows a December 2018 ruling by the Competition Commission rejecting the merger.

The commission said that the merger would eliminate competition between the two companies and they would control the entire value chain of the ostrich industry.

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In January this year, KKI and Mosstrich filed an application in the Tribunal challenging the commission decision, according to an IOL report.

During a turbinal hearing in July, the companies argued that the merger is necessary to stabilise the ostrich industry which is suffering a significant decline.

This was due to factors such as drought and the recurrence of avian influenza resulting in export bans on raw meat.

The parties also tendered enhanced competition conditions which resulted in the Tribunal granting the merger subject to conditions.

The conditions imposed by the tribunal relate to ensuring the availability of ostrich feathers to producers of various feather-related products in South Africa. 

Additionally, the tribunal noted that ostrich steaks, fillet and trimmings must be available to wholesalers and retailers of ostrich meat products.

The merged entity will also be obliged to offer at least 40 percent of its slaughter line ostrich feathers on tender, in each financial year.

Third parties, such as ostrich farmers who bring their ostriches to the company for slaughter, must be allowed to retain their feathers if they wish to, on reasonable terms, the tribunal said.

The tribunal also ordered that the merged company would not be allowed to retrench staff for three years after the merger.

“The merging parties agreed that the current agreements between Mosstrich and two of its customers, Buffelskom Boerdery and Ostriland, will be amended to remain in place indefinitely – subject to a 24-month notice period in which either party may cancel the agreement,” the Tribunal said.

Meat from ostriches, the world’s biggest bird, is lean and prized as its comparatively healthier than beef.

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