Competition Commission chief legal counsel Bukhosibakhe Majenge, during a hearing held by the Competition Tribunal and led by tribunal chairperson Mondo Mazwai, on August 18, said the commission endorses the proposed acquisition of Burger King South Africa by private equity fund ECP Africa Fund based on the amended conditions set out by the parties to the transaction.
The hearing was split into two session, one a public session that discussed the non-confidential principles on which the amended conditions are based to address public interest concerns and the dilution of broad-based black economic empowerment (BBBEE) resulting from the deal, and a second closed session in which the parties discussed confidential details of the proposed amended conditions with the tribunal.
"The commission's assessment found that there were no competition concerns arising from the transaction. Additionally, in terms of the public interest, there were found to be no employment concerns, as the merging parties made an unequivocal undertaking that there would be no retrenchments as a result of the merger," said Majenge.
However, significant public interest concerns arose from the transaction related to BBBEE, and the parties to the transaction did not dispute that the transaction would result in the dilution of BEE representation in the target firms, he said.
"[Under the] terms of the latest version of conditions, which have been suggested to the Department of Trade, Industry and Competition (DTIC), it is our submission that the incremental changes proposed do not detract from or dilute the initial conditions proposed."
Further, the expanded commitments made as part of the amended conditions proposed were "a clear and significant expansion of the commitments", notably R500-million that would be invested as capital expenditure to increase the number of Burger King South Africa stores from 60 to 150, as well as to incrementally employ an additional 1 250 historically disadvantaged persons.
Additionally, the parties committed to increasing the value of the payroll and employee benefits by an amount of no less than R120-million.
"Expansion on its own will not necessarily address the concerns we raised, but should be seen as part of the package holistically."
Further, ECP Africa Fund has also committed to create an employee share ownership scheme, through which employees would hold a 5% interest in the business, which the commission views as significant, said Majenge.
Additionally, ECP Africa Fund intends to sell the Grand Food meat plant to a historically disadvantaged person or persons. The disposal or divestiture of the meat plant will provide an opportunity for new entrants into the value chain.
The details of this part are claimed to be confidential, and the parties to the transactions do not wish to prejudice the meat plant transaction, but the parties commit to notify and seek approval from the Competition Tribunal when the disposal or divestiture from the meat plant is advanced, said Advocates Group 621 senior council Jerome Wilson.
Further, in the commitments relating to South African suppliers, the clear intention is to improve compliance with the enterprise supplier development of the merging parties, which will also impact on the BBBEE scorecard of the company, if the transaction is approved, said Majenge.
"The package and conditions as a whole address the public interest concerns raised by the commission relating to the transaction," he said.
Wilson added that the amended conditions reflect a joint position between the parties to the transaction and the DTIC.
Mazwai raised various concerns relating to specific figures and timeframes, especially to enable the competition authorities to monitor compliance with the conditions.
Many of the figures were presumed to have been discussed in the confidential session, as Wilson confirmed that many of the concerns raised during the hearing were addressed in the confidential information of the amended conditions, which was closed to the public.
The hearing was closed, with the tribunal committing to make its decision known in due course, once furnished with additional information by the parties.