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TRIBUNAL APPROVES FOSCHINI’S ACQUISITION OF JET,
WITH CONDITIONS
The Tribunal has approved, with conditions, the proposed merger whereby Foschini Retail Group (Pty) Ltd (Foschini) will acquire Edcon’s Jet Division i.e. the assets and business conducted by Edcon Ltd as a going concern under the "Jet" division out of certain Edcon physical retail stores in South Africa.
In considering the proposed transaction, the Tribunal conducted virtual proceedings and heard submissions from the Competition Commission (the Commission), the merger parties as well as the South African Commercial Catering and Allied Workers Union (SACCAWU).
The Tribunal’s order and the conditions will be made available on the Tribunal’s website in due course. The conditions to the merger include the following, among others:
EMPLOYMENT
- The acquiring firm (Foschini) will not retrench any employees as a result of the merger for a period of 2 (two) years from the merger’s implementation date;
- Transferring employees must be transferred to Foschini in accordance with the provisions of section 197 of the Labour Relations Act, after the merger implementation date; and
- Foschini will give preference to eligible Edcon employees should vacancies arise in the Jet Business for a period of 3 (three) years from merger implementation date.
TRANSFERRING STORES
Among others, the merging parties will ensure that the transferring stores are fully integrated into the acquiring firm’s structures after the merger implementation date and are operated in accordance with the acquiring firm’s business plans after the merger implementation date, subject to external circumstances (such as prevailing macro- and micro-economic conditions, the effects of the COVID-19 pandemic, landlords honouring the terms of the new lease agreements, and electricity supply disruptions) and internal circumstances (such as the acquiring firm’s trading performance).
LOCAL PROCUREMENT
The merged entity must ensure that Jet stores maintains at least the same ratio of procurement of apparel products from South African manufacturers and suppliers as it did at the end of its preceding financial year. In addition, the merged entity must endeavour to increase the target firm’s ratio of procurement of apparel products from South African manufacturers and suppliers as at the end of its preceding financial year.
Background
The Foschini Group is one of the foremost independent chain-store groups in South Africa and has a diverse portfolio of fashion retail brands offering clothing, jewellery, cell phones, accessories, cosmetics, luggage, sporting apparel and equipment, homeware and furniture.
The Jet Division is Edcon’s discount department store division. It sells clothing, footwear, homeware, some cosmetics as well as cellular and insurance products.
The Commission, which assesses large mergers before referring them to the Tribunal for a decision, found that the transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets.
The Commission recommended to the Tribunal that the merger be approved with conditions relating to employment and local procurement.
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