The Competition Tribunal has extended the compliance period for one of the conditions imposed on PepsiCo in March 2020, from 12 months, to 18 months.
The conditions stem from a merger in which PepsiCo indirectly acquired Pioneer Food Group through PepsiCo’s South African subsidiary Simba.
The merger, one of PepsiCo’s largest acquisitions outside of the US, was approved by the tribunal, subject to a raft of public interest conditions.
The tribunal notes that, of relevance to this extension application (brought by the merged firm), is the condition relating to a broad-based black economic empowerment (B-BBEE) ownership plan, which was to be implemented by March 22.
However, according to the merged firm, delays in implementing this condition have been caused by, among others, Covid-19 and the resulting lockdown.
The B-BBEE condition involves employees in the company being issued with shares in PepsiCo worth R1.6-billion. This condition had to be implemented within 12 months from the transaction closing date, which occurred on March 23 2020.
The Competition Tribunal has now extended the 12-month period to 18 months.
When the conditions were first imposed, Trade, Industry and Competition Minister Ebrahim Patel intervened in the merger proceedings before the Competition Tribunal on the grounds of public interest.
However, following an agreement reached between PepsiCo and Patel in the course of the proceedings, and after considering submissions by the merger parties – the Competition Commission, Patel and the Food and Allied Workers’ Union – the tribunal conditionally approved the transaction in March 2020.
The merger was the first major transaction in which the promotion of a greater spread of ownership in firms – in particular, by workers and historically disadvantaged persons – was a central issue in assessing the transaction under the provisions of the Competition Amendment Act, 2018.
Further, in addition to employees being issued with the shares worth R1.6-billion, the merged firm will provide an additional amount of R55-million as compensation for any potential economic prejudice to workers during the six-month extension period - March 23 to September 22.