The Competition Commission has recommended that the Competition Tribunal approve the acquisition of DairyBelle’s yoghurt and ultra-high-temperature (UHT) milk manufacturing, marketing and distribution businesses by JSE-listed branded consumer goods and beverages group Clover, with conditions, including that Clover continue to provide secondary distribution services to Danone Southern Africa until June 2015.

Other conditions attached to the approval of the merger were intended to mitigate the potential negative impact of the merger on employment, Competition Commission deputy commissioner Hardin Ratshisusu said.

Clover last year announced it would not renew several agreements with Danone Southern Africa when the current contracts ended in December 2014, which would enable the company to pursue other opportunities.

Subsequently, it announced in May that it planned to buy DairyBelle’s yoghurt and UHT milk businesses for R125-million and R30-million respectively.

The Competition Commission said that it had, in its investigation of the merger, assessed the markets for the manufacture of UHT milk, the procurement of raw milk from farmers and the provision of secondary distribution services to third parties.

It had received varied concerns from farmers with regard to the market for the procurement of raw milk but found that the merger itself was unlikely to result in the change of current market dynamics.

However, concerning the market for the provision of secondary distribution services to third parties, the commission ascertained that Clover’s decision to stop supplying Danone with secondary distribution services would lead to anticompetitive outcomes and a negative effect on employment.

The commission said it had established that Danone would not be able to replace the services provided by Clover within a reasonable period and, therefore, recommended that this merger be approved with a condition aimed at ensuring that Clover continued to supply Danone with secondary distribution services for its yoghurt products until June 2015.

Further, the commission noted that the merging parties had indicated to the commission that the proposed merger would not result in retrenchments and agreed to a one-year moratorium on retrenchments.

“However, the commission found that this merger would result in a substantial effect on employment when Clover’s and DairyBelle’s facilities are integrated in future. To address these public interest concerns, the commission recommended to the tribunal that a condition be attached, which stipulates that no retrenchments should result from this merger,” the commission said.

It also recommended that Clover should set aside an employee grant of R30 000 to fund business opportunities in the event that any employee is retrenched post integration of Clover’s and DairyBelle’s facilities. In terms of the recommended condition, the employees could also opt to use the R30 000 for training and reskilling opportunities.