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TRIBUNAL CONDITIONALLY APPROVES SENWESBEL’S ACQUISITION OF SUIDWES HOLDINGS
The Tribunal has today, 18 August 2020, issued an order approving the proposed merger involving Senwesbel Ltd (Senwesbel) its subsidiary, Senwes Ltd (Senwes) and Suidwes Holdings (Ring Fenced) (Pty) Ltd (Suidwes) (collectively ‘the merging parties’).
This follows merger proceedings during which the Tribunal heard evidence and arguments in the matter, including submissions from an independent expert called by the Tribunal.
A non-confidential version of the order and reasons for the Tribunal’s decision will be made available on the Tribunal's website in due course.
Background
The primary acquiring firms are Senwesbel and its subsidiary, Senwes. Established in 1909, Senwes it is one of the largest agricultural businesses in South Africa. Its main activities include grain handling and storage, financing, grain trading, grain transport, equipment sales, agricultural retail stores, insurance, agriculture inputs and agriculture services. It supplies its products largely to commercial farmers, millers and oil seed processors and traders. It operates mainly in the Free State, Gauteng and North West provinces. Senwes is a public company.
Suidwes, a 111-year-old agricultural company, is a private company. Most of the shareholding in Suidwes is held by farmers. Suidwes controls several firms, including Suidwes Investments (Pty) Ltd, Suidwes Agriculture (Pty) Ltd and Africum Ltd. Its business activities range from grain storage and handling, grain trading, the operation of retail outlets to financing and agricultural services, amongst others.
The Commission – which investigates and assesses large mergers before referring them to the Tribunal for a decision – initially recommended that the proposed merger should be approved subject to conditions, but thereafter changed its recommendation to one of prohibition. In its revised view, the Commission maintained that the transaction was likely to substantially prevent or lessen competition.
It argued that the proposed merger should be prohibited on a number of grounds:
- It contended that the proposed merger would give rise to a loss of competition between Senwes and Suidwes in the market for the provision of grain storage services in three identified geographic areas in the Free State and North West provinces. The merger, it argued, would result in the merged entity establishing a monopoly of grain silos within two of the three identified geographic markets.
- It further contended that the merger would likely lead to an increase in storage and handling fees at silos controlled by the merged entity and the loss of competitive rivalry in the procurement of grain from farmers.
The merging parties opposed the Commission’s recommendation and disputed its theories of harm to competition, as well as its conclusions. The merging parties also submitted that the target firm is in financial distress and would exit the market absent the transaction.
Despite disputing the Commission’s findings, the merging parties tendered a set of conditions, which subsequently formed the basis for further iterations. The conditions were amended during the course of the hearing, resulting in the final tender which included a pricing condition, the divestiture of certain grain silos, and public interest conditions related to employment as well as the provision of production loans to black farmers.
The Tribunal has approved the proposed merger, subject to the conditions tendered.
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