competition competition policy enterprise development public policy regulation small business

Anheuser-Busch InBev wins over South African government

Anheuser-Busch InBev released a media statement yesterday on its negotiations with the South African government on its proposed take-over of SAB Miller. The Competition Commission has an extension until the 05 May to conclude its investigation of this transaction and make recommendations to the Competition Tribunal to either approve it with or without conditions, or block it.

According to the statement:

‘An agreed approach has been concluded between the South African Government and Anheuser-Busch InBev SA/NV (“AB InBev”) in relation to the public interest conditions that will be recommended to the Competition Commission and Competition Tribunal in connection with the proposed acquisition of SABMiller plc (“SABMiller”) by AB InBev. The package of commitments addresses employment, localisation of production and inputs used in the production of beer and cider, empowerment in the company, long-term commitments to South Africa and participation of small beer brewers in the local market.’

The commitments include:

  • R1bn investment to support small-holder farmers as well as to promote enterprise development; local manufacturing, exports and jobs; the reduction of the harmful use of alcohol (including making available locally produced low and no-alcohol choices for consumers) and green and water-saving technologies. Part of this fund will finance 800 new emerging farmers and 20 new commercial farmers to produce barley, hops, maize and malt for the company, with the strategic intent to create additional jobs in the agricultural supply chain.
  • No involuntary job losses in South Africa as a result of the transaction
  • The company will maintain its total permanent employment levels in South Africa as at the date of closing, for a period of five years
  • The company will work government to reduce the harmful use of alcohol, including through introducing and promoting no-alcohol and lower alcohol products, including through brewing these products locally where possible.
  • The company will maintain South African Breweries’ current Zenzele BEE share-scheme until the scheme expires in 2020, and within two years of deal closure, outline its long-term empowerment commitments beyond 2020
  • AB InBev’s regional head-office for Africa will be located in Johannesburg
  • AB InBev already has a secondary listing on the Johannesburg Stock Exchange
  • The company will support the participation of small craft-beer producers in local markets

Minister of Economic Development Ebrahim Patel is quoted as saying “South African Breweries – the SABMiller predecessor – has been an important company in the South African economy for many years. This transaction is by far the largest yet to be considered by the competition authorities and it is important that South Africans know that the takeover of a local iconic company will bring tangible benefits. Jobs and inclusive growth are the central concerns in our economy. Our competition laws specifically provide for consideration of the employment and public interest impact of mergers and acquisitions. Following the announcement of the proposed acquisition of SABMiller, the South African government carefully evaluated the likely impact on jobs, small businesses, farmers and economic empowerment. We engaged with AB InBev to identify commitments that can ensure that the transaction has a net benefit for the country. The commitments made by the company are the most extensive merger-specific undertakings made to date in a large merger. In our view, they meet the requirements of the competition legislation. The agreed terms will be placed before the competition authorities for consideration.”

Carlos Brito, CEO of AB InBev added: “We are pleased to have reached this agreement with the South African Government. As we have stated from the outset, we are excited about the growth opportunities and the role South Africa will play in our combined business. Recognizing South African Breweries’ important contributions to South Africa’s economy and society, our commitments seek to build on this deep heritage and we believe there is a huge amount that the two companies can achieve together to the benefit of all stakeholders.”

The company says that the agreement above will be provided to the Competition Commission for consideration as part of its assessment of the competition and public interest impact of the proposed acquisition. That assessment will culminate in a recommendation by the Commission to the Competition Tribunal.

See the rest of the statement here

competition competition policy mergers and acquisitions public policy regulation

SABMiller buyout will test merger guidelines

THE takeover of South African firms by international companies excites a lot of passion. There was heated debate when Massmart became a subsidiary of US retail giant Walmart. Stakeholders raised concerns when AgriGroupe went off with Afgri, Du Pont Pioneer with a majority stake in Pannar, Glencore with Xstrata and Shanghai Zendai with a big chunk of Modderfontein. Now along comes the so-called MegaBrew deal, the takeover of SABMiller by Anheuser-Busch InBev (AB InBev), one of the biggest transactions in global corporate history. Strictly speaking, SABMiller is not South African. Its primary listing is in London. The most significant equity block is held by Altria (26.99%, the company’s latest annual report shows), followed by a company associated with the Santo Domingo family (13.99%).

Readers of the fashion media will be familiar with the Santo Domingo name for other reasons. The Public Investment Corporation owns just more than 3%. But SABMiller is, or was, one of the most South African companies imaginable with its Johannesburg roots, its production line of corporate stars and rainbow nation advertisements. History aside, the company sells more than 90% of the beer consumed in SA, according to a company presentation made last year.

This is a significant company by any measure, with touchpoints across many value chains. The implications of its future ownership by AB InBev will be analysed carefully by the authorities.

competition industrial inputs mergers and acquisitions regulation

Competition Commission prohibits merger between producers of key mining and industrial input

Excerpts from Competition Commission’s media release:

” On 08 May 2014, the Competition Commission referred a recommendation to the
Competition Tribunal to prohibit the proposed acquisition of Arkema Resins by Ferro
Industrial Products. The Commission found that the proposed merger is likely to
result in a substantial prevention and lessening of competition.
In the mining segment, the merging parties are currently the only suppliers of UPR
and the Commission found that the merger would result in the removal of an
effective competitor, leaving Ferro to enjoy a monopoly position post-merger.
The Commission also found that in other segments, the proposed merger would
result in the merged entity gaining a significant share of the market of approximately
64%, with the closest competitor having approximately 16%. The rest of the market
is accounted for by a small local supplier and some imports.
The Commission found that there are high barriers to entry in the UPR market due to
the high capital outlay required for entry, economies of scale and the existence of
excess capacity. In the mining segment, there are additional barriers to entry in the
form of reputation, technology, technical expertise and technical specifications
required. The excess capacity may also be used as a strategic deterrent for entry
and expansion.
The Commission’s investigation included interviews with customers and competitors
of the merging parties who also raised concerns regarding the proposed transaction.
The Commission considered possible remedies such as divesture of Arkema’s
composite business, but this was not deemed to be viable as the firm’s coatings
business is also located in the same plant, making it impractical to separate them.
The merging parties also proposed a pricing formula applicable for two years. The
Commission is of the view that the pricing formula will not address the
anticompetitive effects arising from the structural changes in the market brought
about by the proposed transaction.”