The Competition Tribunal has approved the merger between South Africa’s largest ostrich product processing companies, Klein Karoo International (KKI) and Mosstrich, subject to several conditions.

KKI and Mosstrich supply ostrich slaughter and ostrich feather-related services to ostrich farmers, as well as tannery services for ostrich skins.

The markets for the supply of ostrich feathers, meat and skins are largely export oriented.

The conditions imposed by the tribunal relate to ensuring the availability in South Africa of ostrich feathers to producers of various feather-related products; ostrich meat such as ostrich steak, fillet and trimmings to wholesalers and retailers of ostrich meat products; and access to the merging parties’ abattoirs and tanneries in South Africa.

The merging parties currently have abattoir facilities in Oudtshoorn, Mossel Bay, De Aar and Graaff-Reinet and tannery facilities in Mossel Bay and Oudtshoorn.

OSTRICH FEATHERS

The merged entity will, following conclusion of the proposed transaction, be obliged to offer at least 40% of its slaughter line ostrich feathers on tender in each financial year.

The tender process will be managed by independent auditors on behalf of the merged entity and such auditors will be required to submit a yearly certificate to the Competition Commission confirming compliance with this condition.

The continuation of the current tender system for ostrich feathers and the further obligation to offer 40% of the merging parties’ slaughter line ostrich feathers on tender will ensure the status quo, as before the merger, remains.

Third parties such as Lewitton Industrial, Rancho Las Plumas and the Opsa Group buy ostrich feathers locally that are used for downstream production / value-added purposes.

This tender condition will remain in place indefinitely.

In addition, third parties, such as ostrich farmers who bring their ostriches to the merging parties for slaughter, must be allowed to retain their feathers (if they so wish) on terms that are fair, reasonable and nondiscriminatory.

OSTRICH MEAT

The merged entity will also be required to comply with certain yearly volume conditions in relation to their supply of ostrich meat in South Africa for local consumption. This means that it must make a certain percentage of its ostrich steaks and fillets, as well as ostrich trimmings, available for sale in South Africa in each financial year. The percentages relating to the volume condition will remain confidential.

This condition will also remain in place indefinitely.

Currently, various local wholesalers, retailers, restaurants and caterers buy ostrich meat.

CONTRACT ACCESS

The merging parties agreed that the current agreements between Mosstrich and two of its customers, Buffelskom Boerdery and Ostriland, will be amended to remain in place indefinitely, subject to a 24-month notice period in which either party may cancel the agreement.

The percentage yearly inflationary increase of tanning/slaughtering fees will not exceed tannery/abattoir cost inflation and shall be subject to expert determination.

Buffelskom and Ostriland will not be restricted from competing with the merged entity for the duration of the agreement, during the notice period or thereafter.