Further to our November update (available here), the Competition Commission has recommended to the Competition Tribunal that it should unconditionally approve the proposed takeover by AgriGroupe (a foreign company) of AFGRI. The Commission found that no competitive overlap existed between AFGRI and AgriGroupe and that the merger was unlikely to substantially prevent or lessen competition in the market for agricultural commodities, storage, trading and other related services.

Notwithstanding the lack of 'competition issues', the Commission conducted an in-depth analysis of the matter following public interest concerns raised by certain third parties, including government (reminiscent of the Massmart/ Wal-Mart merger of 2012):

• the African Farmers' Association of South Africa, the South African Communist Party (SACP) and the National African Farmers' Union raised concerns about the negative effect that the merger may have on farmers, specifically black farmers;
• the SACP also raised employment concerns; and
• the government (represented by the Economic Development Department, the Department of Trade and Industry, the Department of Rural Development, the Department of Agriculture and the Department of Forestry and Fisheries) raised concerns that post-merger AgriGroupe would increase grain storage prices in the KwaZulu-Natal, Mpumalanga and Gauteng regions, as it would own the majority of silos in these provinces, and that silos are an essential facility for food security in South Africa. Government also submitted that AgriGroupe would export grain which may result in an increase in the local price of grain/ maize in South Africa.

The Commission dismissed these concerns on the basis that:

• there was currently spare capacity at AFGRI's silos and it would not make commercial sense to exclude any category of farmer from utilising them;
• conditions of access to the silos was a subject of negotiations and nothing stopped any stakeholder, including government, from engaging in improving such conditions in the interest of black or small scale farmers;
• there was no evidence that AgriGroupe would not continue to provide the assistance that was currently provided by AFGRI to small farmers; and
• the merger would in fact result in job opportunities in the long term, not job losses.

The Commission noted that other concerns were raised which fell outside of its jurisdiction. It directed the parties to pursue these concerns with other relevant institutions.

The Tribunal hearing was set down for 6 March 2014. The date for third parties to make submissions at the hearing has expired, with no third party yet indicating that representations would be made.

It remains to be seen whether any last-minute surprises may emerge at the hearing. Desmond Rudman and Andrew Konstant of Webber Wentzel are acting for AFGRI in this matter.

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