Commission recommends approval of Clover/Dairybelle deal - CNBC Africa

Commission recommends approval of Clover/Dairybelle deal

Southern Africa

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Clover recently announced its intention to acquire Dairybelle’s Yoghurt and UHT Milk Businesses. PHOTO: Vita Belle

Real Beverage Company (Pty) Ltd, a wholly-owned subsidiary of [DATA CLR:Clover], recently announced that it would acquire Dairybelle’s Yoghurt and UHT Milk Businesses.

“Both Clover and Dairybelle are active in the dairy industry manufacturing a varied portfolio of products. The commission assessed the markets for the manufacture of UHT Milk, procurement of raw milk from farmers and the provision of secondary distribution services to third parties,” it said.

“The commission did not consider the market for the manufacture of yoghurt in its analysis as Clover is currently not active in this market. With respect to the market for the manufacture of UHT milk, the commission found that no anti-competitive effects would arise post-merger.”

(READ MORE: Clover acquires Dairybelle’s business)

Clover, which currently supplies secondary distribution services to Danone Southern Africa, has issued a notice to terminate its agreement with Danone.

The conditions aim to address a possible impact on employment and to ensure that Danone would continue to have access to secondary distribution services for yoghurt products currently supplied by Clover.

“The commission recommended that this merger be approved with a condition aimed at ensuring that Clover continues to supply Danone with secondary distribution services for its yoghurt product until June 2015,” it said.

“The commission ascertained that Clover’s decision to stop supplying Danone with secondary distribution services would lead to anti-competitive outcomes and negative effect on employment.”

The South African institution also found that the merger would have a substantial effect on employment when Clover’s and Dairybelle’s facilities integrate in the future.

“In order 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,” it said.

“The commission further recommended that Clover should set aside an employee grant of 30,000  rand to fund business opportunities in the event any employee is retrenched post integration of Clover’s and Dairybelle’s facilities.

(READ MORE: Clover’s HEPS down 14.3%)

While the commission stated that it did receive varied concerns from farmers with regards to the market for the procurement of raw milk, it found that the merger itself was unlikely to result in the change of current market dynamics.

“These concerns related to buyer power and continued collusion in the market. Some of the concerns raised by the dairy farming community are a subject of the commission’s other investigations,” the commission said.

Acting deputy commissioner, Hardin Ratshisusu said, “In the main, the recommended conditions are intended to address the potential negative impact of the merger on employment as well the ability of Danone to compete in the yoghurt market.”

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