admin
Senior Business Reporter
THE Competition and Tariffs Commission (CTC) has directed diversified investment group, Innscor Africa Limited, to divest from Capri within six months before its proposed deal with Annunaki Investments is given a nod.
Although the proposed merger is classified as a conglomerate in nature, which entails not posing serious competition concerns, CTC noted that the proposed deal has the effect of neutralising competition between two major competitors.
The regulator said in February 2020 it received a notification of a merger involving Annunaki Investments and Innscor’s appliance manufacturing unit, Capri.
The proposed merger was an acquisition of a 25 percent stake in Capri by Annunaki, an investment vehicle, wholly-owned by SSCG Africa Holdings.
Capri manufactures household refrigerators and distributors of electrical appliances.
“The proposed transaction was classified as a conglomerate in nature. Conglomerate mergers in nature and by definition do not pose serious competition concerns,” said CTC in a latest update contained in its monthly newsletter.
“However, in this instance competition concerns were in the indirect market of fund management, as the merger had the effect of neutralising competition between two major competitors through indirectly uniting them,” it said.
Given that household refrigeration market conditions are associated with high barriers to entry and that there is the protection of the industry from import competition, predation was likely.
“Furthermore, Capri is a dominant player in the market and is owned by Innscor Africa Limited (IAL), a deep-pocketed conglomerate company.
“Therefore, the acquisition of Capri by Annunaki, gives another deep-pocketed company, SSCG control over Capri, which would further enhance Capri’s financial position,” said the regulator.
“Capri could use this financial strength to sustain predation in restricting entry of new players in the market.
“With regards to concerns of the merging parties, the Commission viewed that the merger was not necessary since IAL was financially sound to meet the needs of Capri.”
CTC added that Innscor did not have any financial challenges, which required support funding from SSCG noting that since the merger assessment is forward-looking, any anticipated competition concerns had to be dealt with before they had taken place.
“The commission reviewed its decision subject to the condition of divesture. Considering this, the final decision of the commission was that: the acquisition by Annunaki Investments (Pvt) Ltd of an indirect interest in Capri be approved on condition that Innscor Africa Limited completely divests from Capri within six months of receiving the commission’s decision; the penalty paid of $848 464,48 for consummating the merger without the approval of the commission, be maintained.”
Bongani Ndlovu
Online Reporter