The Competition Tribunal has imposed strict conditions for the sale of Burger King SA and Grand Foods Meat Plant, owned by Grand Parade Investments, to ECP Africa Fund after the Competition Commission initially prohibited the merger on public interest.
The commission wanted to stop the merger because the shareholding of historically disadvantaged persons (HDPs) in Burger King would decrease from more than 68% to 0%. There were no employment concerns as ECP Africa Fund gave an unequivocal undertaking that no retrenchments would follow the merger. The transaction also did not raise any competition concerns.
ECP Africa Fund entered into discussions with the commission and the Department of Trade, Industry and Competition after the prohibition to resolve concerns around the effect of the merger on the promotion of a greater spread of ownership and increasing levels of ownership by HDPs and workers.
After ECP Africa Fund then approached the tribunal for a reconsideration of the commission’s decision, a revised set of merger conditions was proposed that was not opposed by the Commission.
The tribunal heard submissions from the merger parties, the commission, the department and Southern African Clothing and Textile Workers Union (Sactwu), a union representing workers at Grand Foods, and the meat plant which primarily supplies Burger King SA with burger patties during an online hearing.
After considering the submissions, the tribunal approved the transaction with these merger conditions that address the several public interest issues:
- Expansion commitments that involve an investment of R500 million in terms of capital expenditure, increasing the number of Burger King outlets in South Africa from 90 to at least 150 and in addition to current permanent employees, employing 1,250 HDPs as permanent employees to increase the value of the payroll as well as employee benefits by R120 million.
- Commitments relating to South African suppliers that involves local procurement and improved compliance with the Enterprise Supplier Development element of the merger parties’ broad-based black economic empowerment scorecard. The details are confidential.
- Commitments relating to an employee share ownership programme that will provide an effective 5% interest to workers in Burger King SA.
- A commitment to divest the meat plant and conclude the meat plant disposal. The commission must be notified of the transaction even if it is classified as a small merger. Burger King SA must preserve and maintain the economic and competitive value of the meat plant in line with good commercial practice and must conclude a supply agreement with the meat plant or the meat plant buyer to procure inputs from the meat plant.
The conditions also contain an express provision that the merged entity will not retrench any employees as a result of the merger. The rest of the conditions have been claimed as confidential by the merger parties.