The Competition Commission has recommended to the Competition Tribunal that the proposed merger, whereby Milco SA intends to acquire Clover, be approved, with conditions.

Milco SA, a special purpose firm incorporated in South Africa, is controlled by Mauritius International (MMI). Clover’s management and a replacement black economic empowerment (BEE) partner are minority shareholders in Milco SA.

MMI is, in turn, controlled by International Beer Breweries Limited (IBBL), an Israeli marketer and distributor of beer and non-alcoholic beverages.

IBBL is a subsidiary of the Central Bottling Company (CBC), an Israeli based manufacturer and distributor of soft drinks, dairy products and alcoholic beverages.

Of relevance to the proposed transaction is Gat Givat Haim Cooperative (GAT Foods), a subsidiary of CBC, which is involved in the manufacture and distribution of juice concentrate in over 70 countries including South Africa.

Of further relevance to the proposed transaction are the other non-controlling shareholders in MMI, namely, Ploughshare Investments and Incubev.

Ploughshare is a privately owned, independent investment company which is part of a broader international investment group which has investments in retail, distribution and non-alcoholic beverages. IncuBev is an international business focused on the food and beverage sectors in sub-Saharan Africa.

JSE-listed Clover produces non-alcoholic beverages which include dairy products, soy products and other non-alcoholic beverages such as fresh fruit juices, dairy-based fruit juices, carbonated soft drinks, water and iced tea.

From a competition perspective, the commission’s concerns are two-fold.

Firstly, the commission is concerned that given that GAT Foods supplies juice concentrate in South Africa, it is likely that Clover will have the incentives, post-merger, to source juice concentrate in-house, which may harm Clover’s current juice concentrate suppliers.

Secondly, the commission has found that the post-merger structure will create a platform that is likely to facilitate coordinated conduct through information sharing in relation to the sale of non-alcoholic beverages.

To address the above concerns, the commission believes the proposed transaction should be approved subject to conditions, including that the merging parties commit to procuring juice concentrate from their current local suppliers for a certain period on reasonably the same terms and conditions as before the merger; and preventing the potential flow of competitively sensitive information. 

In respect of public interest, the commission is also concerned that the proposed transaction is likely to result in some job losses.

To address these concerns, the commission has set out that the merging parties should not retrench any employees for a certain period; should create a certain number of new permanent employment positions within a certain period post-merger; should set up a reskilling fund to the tune of R10-million; and should give preference in respect of new vacancies to any employees that may lose their jobs post-merger; besides other conditions.

The merging parties have agreed to these conditions.