The Competition Tribunal on Friday announced that it had approved the merger between pharmaceutical company Adcock Ingram and Bidvest subsidiary BB Investment Company, on condition that Adcock would not retrench any employees for one year from the day the deal was approved.
The tribunal pointed out that, while there were no competition concerns arising from the merger, the deal had raised employment concerns as a result of Adcock’s plans to embark on a restructuring exercise, through which it had identified 51 positions as being redundant.
The Competition Commission earlier said that it was satisfied that Adcock had followed a rational and fair process in identifying the redundant positions, therefore, it initially concluded that a moratorium on the retrenchment of the 51 employees was not warranted.
However, Bidvest later informed the commission that it intended to implement a turnaround strategy upon completion of the merger that could result in further retrenchments over and above the 51 positions.
Consequently, the commission saw the need to guard against any further negative effects on employment that would be introduced after the merger and recommended that the tribunal impose a moratorium on “merger-specific retrenchments” for a period of three years, which the merging parties opposed.
Therefore, the tribunal had to make a finding on whether Bidvest had acquired material influence over Adcock, to determine whether the proposed retrenchments were merger specific as opposed to operational.
After examining the facts, the tribunal concluded that Bidvest had at least acquired material influence over Adcock before filing the transaction with the commission and, therefore, concluded that the proposed retrenchments were merger specific.
It further concluded that as there had not been adequate consultation with the commission and the representative trade union involved, which meant that the retrenchments could not be said to have been justified, it was imposing the moratorium.
Despite the moratorium, the tribunal’s order made it clear that the firm could still embark on voluntary retrenchments. The moratorium also did not apply to employees at Adcock facilities outside South Africa who were not subject to the tribunal’s jurisdiction.
Meanwhile, with regard to Bidvest allegedly having acquired control over Adcock before filing the merger with the commission for assessment, the commission indicated that it would be investigating a case of prior implementation of a merger, in contravention of the Competition Act.
Adcock’s share price on the JSE reached a high of R52.63 on Friday, 7.43% higher than Thursday’s close of R48.99 a share.