Tribunal publishes reasons for conditional merger approval involving Pharma-Q and Imperial Logistics' acquisition of pharma firms

The Tribunal has published the reasons for its decision to conditionally approve the large merger whereby Pharma Q Holdings (Pty) Ltd (“Pharma Q”) and Imperial Logistics (Pty) Ltd (“Imperial Logistics”) intend to acquire Ascendis Pharma (Pty) Ltd (“Ascendis Pharma”), Alliance Pharma (Pty) Ltd (“Alliance Pharma”), Medicine Developers International (Pty) Ltd (“Medicine Developers”) and Pharmachem Pharmaceuticals (Pty) Ltd (“Pharmachem Pharmaceuticals”). Post-merger, Pharma Q and Imperial Logistics will jointly control the target firms.

The Tribunal approved the proposed merger subject to a Management Control Condition that remedies concerns relating to the promotion of a greater spread of ownership by historically disadvantaged persons (HDPs”) as the proposed transaction results in a dilution of HDP shareholding.

The Tribunal’s order and reasons can be downloaded from www.comptrib.co.za. In summary:

Competition assessment

The Tribunal concluded that the proposed transaction does not substantially prevent or lessen competition in any relevant market in South Africa.

Public interest

A Management Control Condition was imposed on the proposed transaction following concerns raised that the HDP shareholding in the target firms would be diluted as a result of the merger – and that the proposed merger did not promote the greater spread of ownership by HDPs and workers in firms in the market. The condition seeks to maintain the HDP representation on the board of the target firms, such that the acquiring firms will have no less than 75% HDP board representation in the target firms as long as they hold shares in the target firms.

The merger parties

Pharma Q is a pharmaceutical intellectual property and brand owner that is active in the manufacture of pharmaceutical products for the private and public sectors.

Imperial Logistics is a transport and logistics provider in various African countries. It also supplies contract logistics and freight services in Europe and the United Kingdom. Imperial Logistics’ activities can be separated into two areas i.e. the provision of market access services to various retail and pharmaceutical customers in South Africa and the provision of contract logistics services.

The target firms, through Alliance Pharma and Medicine Developers, hold pharmaceutical licenses and dossiers and have no commercial activities. Pharmachem Pharmaceuticals is a dormant firm and it holds no pharmaceutical licenses. In addition, Ascendis Pharma is active in the marketing and distribution of prescription and over the counter (“OTC”) medicines. Ascendis Pharma distributes and markets its own brands in gastrointestinal tract, cough and cold, pain, diabetes, and niche generical therapeutic segments of the domestic pharmaceutical market. Ascendis Pharma serves the pharmacy retail market segments. Its customers are retail pharmacies, wholesalers pharmaceuticals, private and government hospitals and clinics.