Shoprite gets approval to buy stores from Makro and Game owner
The Competition Tribunal has approved the Shoprite Group’s proposed transaction to buy numerous Massmart-owned wholesalers, supermarkets, and liquor stores, but with extensive conditions.
Late last year, Shoprite offered Massmart R1.36 billion to buy 56 Cambridge Food and Rhino Cash and Carry grocery outlets, and 43 adjacent liquor stores.
It also sought to buy Massfresh, Fruitspot, ten wholesale cash and carry stores and two liquor wholesalers.
In May, the Competition Commission recommended the Competition Tribunal approve the deal.
However, during a recent three-day merger hearing, intervenors Pick n Pay and Spar argued for the transaction to be blocked.
Shoprite, Massmart, the Department of Trade, Industry and Competition, and the South African Commercial Catering and Allied Workers Union (Saccawu) also participated in the hearing.
In addition, the tribunal received and considered further responses from the participating parties following the hearing.
It identified 10 Cambridge and Rhino grocery retail stores as “highly problematic” for competition, while the rest are approved for takeover by Shoprite.
The tribunal recommended that Massmart sell four of the ten problematic stores to franchisees and create a funding package to facilitate competition from one “existing, high potential, black-controlled independent retail competitor” for the remaining six.
“After considering the commission’s recommendation and the submissions of the participating parties, the tribunal ultimately approved the proposed merger on the basis that the 10 highly problematic stores must be divested by Massmart to a suitable purchaser/s within a specified period from the tribunal’s approval of the merger,” the tribunal said.
Cambridge food till workers
The purchasers of the ten stores must meet the following requirements:
- Be an independent third party (or parties) unrelated to Shoprite
- Must be a small or medium-sized business (SMME) and/or owned by historically disadvantaged persons (“HDPs”);
- Must possess the necessary financial resources, proven technical expertise and incentive to develop the stores as viable and competitive in the relevant geographic areas.
Massmart is also required to preserve and maintain the stores’ economic and competitive value, independence and marketability until the buyers are secured.
The tribunal has provided for the appointment of a trustee to monitor Massmart’s compliance with its obligations in respect of the divestiture.
“The trustee must be independent of the merging parties, possess the necessary qualifications and expertise to carry out his/her mandate and not be exposed to any conflict of interest,” the tribunal stated.
“If Massmart cannot divest of the highly problematic stores within the prescribed period or fails to comply with its obligations in respect of the divestiture, the conditions provide for the trustee to divest of the highly problematic stores,” it added.
Shoprite is further bound by certain public interest commitments relating to employment, the spread of ownership, localisation, and retailer, supplier and skills development.
The tribunal said the merger wouldn’t result in any retrenchments since all the employees of the stores that Massmart is selling will be transferred to the Shoprite Group.
This will be in line with the Labour Relations Act, which means they will enjoy no less favourable wages, working conditions and benefits than those that applied pre-merger.
In addition, Shoprite Group has undertaken to create additional permanent employment opportunities at its local operations.
Massmart welcomes approval
Massmart said it was pleased with the approval following a “rigorous” 19-month-long assessment of the transaction by the competition authorities.
A spokesperson said the approval of the transaction saved 7,000 jobs.
“Had the transaction not been approved, we would have closed the assets and entered into Section 189 consultations, and we were, in fact, preparing for this as a potential outcome,” they said.
“Massmart is now focused on working closely with Shoprite to ensure the smooth and efficient transfer of all affected staff members and assets.”
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