Tribunal extends PepsiCo’s employee share scheme for second time

10th November 2021 By: Simone Liedtke - Writer

The Competition Tribunal has extended, for the second time, the compliance period for the implementation of a landmark broad-based black economic empowerment (BBBEE) employee share ownership plan (Esop), to November 26.

The Esop was imposed as a condition in the March 2020 merger whereby PepsiCo indirectly acquired Pioneer Food Group, through PepsiCo’s South African subsidiary Simba.

An Esop enables employees to own shares in the company they work for.
 
The merger, one of PepsiCo’s largest acquisitions outside the US, was approved by the tribunal, subject to several public interest conditions.

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.
 
Additionally, both extension applications, brought by the merged firm, relate to the implementation of a BBBEE ownership plan.

The BBBEE 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 was March 22 this year.
 
In March 2021 the merged firm submitted that delays in implementing this condition were caused by inter alia complex legal, foreign exchange control, BBBEE compliance, corporate governance, tax and industrial relations aspects, including Covid-19 and the resulting lockdown.

The tribunal extended the 12-month compliance period to 18 months.

Further, in addition to employees being issued shares worth R1.6-billion, the merged firm undertook to provide an additional amount of R55-million as compensation for any potential economic prejudice to workers during the-six month extension period.
 
In this second extension application, the merged firm submitted that formal compliance with the BBBEE condition had been the subject of further delay, for reasons outside of its control.

After considering submissions from the merging parties, the commission, the trade union representing employees of the merged entity, the Food and Allied Workers Union, and the Department of Trade, Industry and Competition, the tribunal decided to extend the compliance period to no later than November 26.