The Competition Commission of South Africa has requested the Competition Tribunal to revoke the approval of the R6bn merger between Premier and RFG. The commission alleges that Premier breached conditions imposed on the deal by planning to close RFG's fruit-canning facility in Tulbagh, Western Cape. This move may lead to approximately 400 job losses, contravening the condition that the merger would not result in job losses. The commission's decision follows a complaint lodged by the South African Clothing and Textile Workers Union.
The merger, one of the largest in the food-producing industry this year, was approved by the Competition Tribunal in April. However, the commission discovered that Premier and RFG failed to disclose information about the planned closure of the cannery. The commission had explicitly requested confirmation of the parties' post-merger plans for the closure, integration, or consolidation of their production facilities. The withheld information was crucial to the commission's assessment of the merger's impact on competition and public interest.
The merger between Premier and RFG will create one of South Africa's largest food producers, with an expected annual revenue of nearly R30bn. Premier had anticipated a significant 35%-45% increase in revenue following the integration of RFG. The deal brings Premier closer to rival Tiger Brands, a long-time leader in the FMCG market. The commission's move is a setback for Premier, which had been looking to expand its operations through the acquisition.
Competition Commission commissioner Doris Tshepe emphasized that withholding material information undermines the integrity of the merger-control regime. She stated that the planned closure of the Tulbagh cannery would remove the only competitor to Langeberg from the South African market, effectively creating a monopoly in the sector. The public-interest consequences would be substantial, including job losses, impact on farmers, and decline in exports.
The commission's investigation found that Premier and RFG had discussed the option of closing the cannery before the tribunal approved the merger. However, they failed to disclose this information to the commission and the tribunal. Tshepe stressed that the integrity of South Africa's merger-control regime relies on parties making full, frank, and honest disclosure of all material information.
Premier is a leading manufacturer of staple foods in South Africa, producing brands such as Blue Ribbon bread, Iwisa maize meal, and Snowflake flour. RFG, on the other hand, produces a range of convenience foods, including Rhodes Quality juices, Bull Brand canned meats, and Squish baby foods. The companies operate facilities in South Africa and export to major markets worldwide.
The Competition Tribunal will review the commission's application to revoke the merger approval. If the tribunal agrees, it could have significant implications for the merger and the companies involved. The commission's decision highlights the importance of transparency and disclosure in merger transactions, ensuring that regulatory bodies can make informed decisions that protect public interest.
Key points
- The Competition Commission seeks to revoke the R6bn merger between Premier and RFG due to alleged breaches of conditions.
- Premier's planned closure of RFG's fruit-canning facility may lead to approximately 400 job losses.
- The merger's revocation could impact Premier's anticipated 35%-45% revenue increase and its position in the FMCG market.
