The Competition Authority (CA) says it has cautiously and reluctantly approved the transaction of the decision on the proposed acquisition of all issued shares of SupaSave and Megasave by Choppies enterprises.
Competition Authority Acting Chief Executive Officer, Magdeline Gabaraane, has revealed that the approved transaction condition is that Choppies should take over the two entities as going concerns but Choppies should, within a period of five years from 2013, provide the Authority with a reasonable exit plan to divest from the target SupaSave outlets, which are within the vicinity of existing Choppies outlets in Mogoditshane, Broadhurst, Gaborone Bus Rank and Palapye.
When briefing the media on Friday, Gabaraane emphasized that the condition is envisaged to attract other entrants in the named retail spaces within the next five years.
“Pursuant to the provisions of Section 66 of the Competition Act, this approval does not override or negate any other mandatory statutory approvals or processes that any of the parties to this merger must comply with under the laws of Botswana,” said Gabaraane.
She pointed out that the analysis of the facts of the merger assessment showed that there were substantial competition concerns that arise in the fast moving consumer goods market in Gaborone, Molepolole and Palapye. She added that the merging parties are close competitors in both product and geographic market dimensions.
“This merger is also expected to enhance the acquiring enterprise’s already existing dominance , which, from our findings, is 40.4 percent in Gaborone, 35 percent in Molepolole, and 37.4 percent in Palapye,” Gabaraane.
She further said that the dominance is, in particular, expected to demonstrate itself in enhancing in Choppies being a low priced retailer as evidenced from the comparative pricing survey done by the Competition Authority.
“Given these competition issues, there is no other hand – a glaring reality that the target enterprises are confirmed competitive failures,” she stated.
Gabaraane pointed out that ordinarily, the transaction should be rejected in the same manner as the Authority rejected the takeover of Shield Security by G4S in April last year. She added that the transaction at hand does raise plausible competition concerns which on a balance of probability cannot entirely be ignored despite the failing firm defence.
“Having satisfied itself with the peculiar failing firm realities of this case, in particular the absence of a counter-notification, the Authority would not want to have a market situation that is uncontrollable and disastrous to the welfare of employees as a result of the imminent exit of SupaSave and Megasave from the markets,” said Gabaraane.
She also revealed that the merger assessment process entailed in-depth merger analysis of economic and legal aspects undertaken to ascertain effect of transaction. She added that the process also includes preventing and lessening competition in the relevant market and also whether the proposed merger would have any public benefits and public interest concerns.
“We cannot penalize anybody for innovation and also we cannot reveal other market players and potential buyers who did show interest in saving SupaSave when it got into financial distress,” said Gabaraane.
The decisions of the Competition Authority are appealable to the Competition Commission or the High Court of Botswana in cases of complaints relating to mergers. Also, the decisions of the Competition Commission are appealable to the High Court with a further and final appeal to the Court of Appeal.
Choppies grocery retail store group got listed on the Botswana Stock Exchange (BSE) last year after the company received BSE approval to list 1.2 billion shares on the domestic main board and currently has 53 stores countrywide while SupaSave has six stores countrywide and uses Megasave as its warehouse arm.