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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM190Jan21
Premier FMCG (Pty) Ltd (Primary Acquiring Firm)
and
Lodestone Brands (Pty) Ltd (Primary Target Firm)
REASONS FOR DECISION
[1] On 22 April 2021, the Competition Tribunal conditionally approved a large merger
between Premier FMCG (Pty) Ltd (“Premier”) and Lodestone Brands (Pty) Ltd
(“Lodestone”).
[2] The transaction involves Premier’s acquisition of “Mister Sweet” as a going concern
from Lodestone, such that Premier will wholly own and control Mister Sweet post-
merger.
[3] Premier is owned by Premier Group (Pty) Ltd.1 The Acquiring Group is involved in
the manufacture, distribution and marketing of branded and private label fast -
moving consumer goods (“FMCG”) in Southern Africa.
[4] Pre-merger, Mister Sweet is a division of Lodestone and operates Lodestone’s
sugar-based confectionary (SBC) business. Lodestone is in turn controlled by
Second Chapter Investments (Pty) Ltd. Mister Sweet does not control any firm.
[5] The Commission found a horizontal overlap in the manufacture and supply of SBC
products in South Africa. These include gums, jellies, chews, compressed tablets,
and marshmallows, amongst others. Premier’s brands include Manhattan and
Super C, while Mister Sweet’s brands include Frutus and Rascals.
[6] The Commission found that the merged entity will have a post -merger market
share of 33.72% 2, with a market share accretion of 27.35% in the market for the
manufacture and supply of SBC products. It found that the merged entity will not
have market power as it will continue to be constrained by other manufacturers
who supply numerous brands (including Tiger Brands and Mondelez).
[7] Two competitors and a customer raised competition concerns that were addressed
by the Commission and the merging parties. The competitors were concerned that
1 Premier Group and Premier will be collectively referred to as the “Acquiring Group”.
1 Premier Group and Premier will be collectively referred to as the “Acquiring Group”.
2 The Commission noted that the market share estimates are likely to be overstated as they only account for
market participants who provided their information during the investigation. Other market participants
include Cartoon Candy, Broadway Sweets, Oya, Winlex E and Mars Consumer Products Africa.
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the merger would lead to (i) the market being controlled by two players; and (ii)
other SBC manufacturers being foreclosed from access to glucose used in the
manufacturing of SBC, due to the bargaining power of the merged entity.
[8] The Commission found, with regard to the first concern, that the merged entity
would continue to be constrained by many other manufacturers, some of which
have been mentioned above. Regarding the glucose concern, the Commission
found that foreclosure was unlikely as the merging parties do not have any
exclusive arrangements with any glucose manufacturers.
[9] The customer’s concern was that Premier should be required to select which
brands to keep supplying to customers, post-merger since they have similar
offerings. In response, the merging parties indicated that they would keep
supplying brands from both Premier and Mister Sweet, in order to give consumers
choice and variety.
[10] For the above reasons, we concluded that the proposed transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
[11] The Commission noted that the merging parties anticipated that the proposed
transaction may result in 25 retrenchments, comprising of five senior exec utives
and 20 duplicative roles out of a combined workforce of 8 052 employees.
[12] The Commission engaged with the representatives of the merging parties’
employees. FAWU, on behalf of Mister Sweet and Premier’s employees, raised
concerns mainly regarding th e merger’s impact on employees’ current jobs,
specifically retrenchments and possible change in employment conditions.
Following investigation, the Commission concluded that the retrenchments were
as a result of duplicative roles.
[13] The Minister of the Depa rtment of Trade Industry and Competition (“DTIC”)
participated in the Commission’s investigation. The Minister required assurance
that no further merger related retrenchments would be implemented, save for the
that no further merger related retrenchments would be implemented, save for the
five senior executives. The Minister also submitted that the balance of the 20 non-
senior executives should be placed and/or absorbed to available positions within
the Premier Group, that may become available through resignations and natural
attritions.
[14] In addressing the Minister’s concerns, Premier undertook, in the form of conditions,
not to retrench any of the non -executive employees (excluding the
) for a period of 24 months post the implementation of the merger. This
means that 19 of the 20 mentioned employees will retain their jobs for a minimum
of 24 months. This will potentially result in six employees being retrenched,
comprising of five executive employees and
[15] At the hearing, following the Tribunal’s questions, the parties tendered a condition
to fill any positions that become available due to resignation or natural attrition
during the 24-month moratorium period, with employees who would otherwise be
retrenched after the 24 -month moratorium on retrenchments. This was made an
additional condition for approval.
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[16] We concluded that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market. We are of the view that the conditions
address the employment concerns that arose. Further, the merger is unlikely to
have a negative effect on any other public interests.
21 April 2021
Ms Mondo Mazwai Date
Mr Enver Daniels and Ms Andiswa Ndoni concurring
Tribunal Case Manager: Camilla Mathonsi
For the Merging Parties: Michael-James Currie and Daryl Dingley
For the Commission: Grashum Mutizwa and Reabetswe Molotsi