The Tribunal has extended, for the second time, the compliance period for the implementation of a B-BBEE Employee Share Ownership Plan ("ESOP"), imposed as a condition in the March 2020 merger whereby PepsiCo Inc. ("PepsiCo") indirectly acquired Pioneer Food Group Limited, through PepsiCo’s South African subsidiary, Simba (Pty) Ltd (“the merged firm”). An ESOP enables employees to own shares in the company they work for.
 
The merger, one of PepsiCo’s largest acquisitions outside the United States, 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, 2018.
 
The B-BBEE condition
 
Both extension applications, brought by the merged firm, relate to the implementation of a B-BBEE ownership plan. 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 was 22 March 2021.
 
In March 2021 the merged firm submitted that delays in implementing this condition were caused by inter alia complex legal, foreign exchange control, B-BBEE 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 i.e., it granted a six month extension. Further, in addition to employees being issued with 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 B-BBEE condition had been the subject of further delay, for reasons outside of its control i.e. administrative delays involving the Master’s Office and the South African Reserve Bank. 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 extended the compliance period to no later than 26 November 2021.