The Competition Court approved Shoprite’s acquisition of certain Massmart stores. But it wants ten stores identified as “highly problematic” to be sold to parties unrelated to Shoprite.
- The Competition Tribunal has approved Shoprite’s acquisition of certain Massmart stores with conditions.
- It wants ten Massmart stores identified as “highly problematic” to be sold to independent third parties unrelated to Shoprite.
- The terms came after Pick n Pay, Spar and Saccawu defended the merger ban.
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The Competition Court approved Shoprite’s proposed acquisition of certain Massmart-owned supermarkets, wholesalers and liquor stores. It also gave Shoprite the go-ahead to buy Massmart’s Massfresh business, but with many strings attached.
Shoprite made an offer to buy 56 Cambridge Food and Rhino Cash and Carry supermarkets and 43 adjacent liquor stores earlier this year. It also wanted to buy 12 Masscash Cash and Carry stores, the entire Fruitspot business and the Massfresh Meat business, which has four facilities. He made an offer of R1.36 billion to Massmart5. The Competition Commission recommended that the Court approve the deal in May.
The Court announced Sunday that after a three-day merger hearing, it had ruled in accordance with that recommendation, but decided to impose certain conditions to address identified competition and public interest concerns.
Two of Shoprite’s competitors, Pick n Pay and Spar; and the South African Commercial Catering and Allied Workers Union (Saccawu) raised their concerns during the Tribunal hearing. The Court said it wanted the authorities to ban the acquisition.
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A non-confidential version of the conditions will be made available on the Tribunal’s website in due course. But, among other things, he wants some of the select “highly problematic stores” to be sold to other retailers unrelated to Shoprite, and some preferably to black retailers.
When the Competition Commission turned the case over to the Court, it identified ten “Highly Problematic Stores” among which Shoprite wanted to buy. These include Cambridge Botshabelo; Cambridge Thaba Nchu; Cambridge Nkandla; Cambridge Ladybrand; Cambridge Mitchells Plain; Qumbu rhino; Cambridge Nongoma; Cambridge/Savemoor Tembisa; Ulundi Rhinoceros; and Cambridge Evaton.
Therefore, the Commission recommended franchising all four of those highly problematic stores and a financing package to facilitate competition from “an existing, high-potential, black-controlled independent retail competitor” for the remaining six. However, the Court approved the merger on the condition that Massmart get rid of the ten stores.
“The Court finally approved the proposed merger on the basis that Massmart must sell the ten highly problematic stores to a suitable buyer within a specified period of time from the Court’s approval of the merger. The buyer(s) must be an independent third-party purchaser(s) unrelated to Shoprite,” the Court wrote in a statement.
He said third parties must be small or medium-sized businesses or historically disadvantaged people. But they must have the financial resources to acquire those stores and the proven technical expertise to turn them into viable and competitive businesses wherever they are located.
Until those buyers are found, Massmart must preserve and maintain the economic and competitive advantage of those stores by providing the necessary funds to keep them in operation and by extending any supply and leasing agreements they have with it.
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The Court has provided for the appointment of a Receiver to oversee Massmart’s compliance with this.
Other conditions relate to employment. The Court ordered that there should be no reductions resulting from the merger. All employees of the stores Shoprite is buying will move from Massmart to Shoprite on the same or better terms they enjoyed at their previous employer, including wages and benefits. In addition, Shoprite Group is committed to creating additional permanent employment opportunities at its local operations.
Shoprite Group will also establish and implement the Shoprite Employee Stock Ownership Program within 60 days of the merger, which will hold 40 million shares in the company at no cost to employees. But employees must have been employed by Shoprite Group for a specified minimum period to be part of that plan.
Employees of the Highly Problem Stores will be immediately eligible to join the scheme upon implementation of the merger, provided they have been employed at the Highly Problem Stores for a specified minimum period.
On localization, Shoprite has committed to increasing its procurement of locally produced food and will maintain supply agreements with MSMEs and suppliers to previously disadvantaged groups. Shoprite also committed to invest more in the development of independent retailers, spaza stores, small farmers, and caterers, among other things.
