Sunday, April 18, 2021

Whither Competition Authority as Payless acquisition unauthorised

The Competition Authority this week detached itself from the acquisition of Payless Supermarkets by businessman Mohamed Abdul Malique, saying it did not approve the transaction.

The deal, which happened last year, should have been notified to the Authority prior to its completion, but was only notified this year after the Authority’s inquiries which forced the two parties to comply with the law.

The proposed transaction involves Malique, who is a minority shareholder in Woodblock (Pty) Ltd, a wholesaler incorporated under the Laws of Botswana, which is engaged in the business of Fast Moving Consumer Goods (FMCG) and is incorporated under the Laws of Botswana.

Sunday Standard understands that through the unauthorised deal, Malique has indirectly acquired 90 percent issued share capital in Payless Supermarket (Pty) Limited. The target enterprise, Payless Supermarket (Pty) Ltd, is incorporated under the Laws of Botswana and is a retailer in the business of FMCG in Botswana.

Magdeline Gabaraane, Director of Mergers and Monopolies said this week that Pursuant to sections 56(1) and 63(1) of the Competition Act (Cap 46:09), the Competition Authority has received a merger notification between Malique and Payless Supermarket.

“This merger notification follows an inquiry by the Authority which revealed that this transaction was implemented without notifying the Authority. Despite the merger having been implemented without notification, the Authority is empowered to retrospectively assess and make a determination to the concerned parties regarding the transaction”.

The Authority has however remained mum on whether they would fine Payless Supermarket for failing to notify it prior to this multi million transaction. The worst scenario could however be the nullification of the merger and reversal of the transaction which took place without the Authority’s approval.

The Payless transaction is the second major merger that happened recently without the approval of the Authority.

Late last year, the shareholders of the country’s leading hospitality group, Cresta Marakanelo had to wait for a while before they could celebrate an acquisition by their company of a Jwaneng based hotel, Cezar Hotel.

The two companies, Cresta Marakanelo and United Promotional Enterprises trading as Cezar Hotel, also did not notify the Competition Authority (CA) prior to their merger.

The Authority however unconditionally authorised the acquisition although some critics argued that it was going to set bad precedence. The then Acting Chief Executive, Tebelelo Pule, said the authority did not apply section 63(2) of the Competition Act and has determined to unconditionally authorise the proposed transaction on the ground that the facts, analysis and conclusions of the assessment of this merger have shown that there are no substantive competition concerns that will arise in the hotel facilities market in Jwaneng.

The authority says that proposed transaction is not likely to result in substantial lessening of competition, nor endanger the continuity of the service, due to the absence of geographical overlap between the activities of the merging parties in Jwaneng.

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