COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM136Dec21
In the matter between:
Sunside Acquisitions (Pty) Ltd Primary Acquiring Firm
And
NBL Investment Holdings Ltd and Distell Group
Holdings Ltd
Primary Target Firms
Panel: M Mazwai (Presiding Member)
AW Wessels (Tribunal Member)
L Mncube (Tribunal Member)
Heard on: 18, 19, 20, 23, and 24 January 2023
Last submission on: 07 March 2023
Decided on: 08 March 2023
Order
Further to the recommendation of the Competition Commission in terms of section
14A(1)(b) of the Competi the Competition Tribunal orders that-
1. the merger between the abovementioned parties be approved in terms of section
16(2)(b) of the Act subject to the conditions attached hereto as Annexure A; and
2. a Merger Clearance Certificate be issued in terms of Competition Tribunal rule
35(5)(a).
08 March 2023
Presiding Member
Ms Mondo Mazwai
Date
Concurring: Mr Andreas Wessels and Prof Liberty Mncube
Date : 08 March 2023
To : Webber Wentzel Attorneys
Case Number: LM136Dec21
Sunside Acquisitions (Pty) Ltd And NBL Investment Holdings Ltd
and Distell Group Holdings Ltd
You applied to the Competition Commission on 02 December
2021 for merger approval in accordance with Chapter 3 of the
Competition Act.
Your merger was referred to the Competition Tribunal in terms of
section 14A of the Act, or was the subject of a Request for
consideration by the Tribunal in terms of section 16(1) of the Act.
After reviewing all relevant information, and the recommendation
or decision of the Competition Commission, the Competition
Tribunal approves the merger in terms of section 16(2) of the Act,
for the reasons set out in the Reasons for Decision.
This approval is subject to:
no conditions.
x the conditions listed on the attached sheet.
The Competition Tribunal has the authority in terms of section 16(3)
of the Competition Act to revoke this approval if
a) it was granted on the basis of incorrect information for which
a party to the merger was responsible.
b) the approval was obtained by deceit.
c) a firm concerned has breached an obligation attached to
this approval.
The Registrar, Competition Tribunal
Notice CT 10
About this Notice
This form is prescribed by the Minister of Trade and Industry in terms of section 27 (2) of the Competition Act 1998 (Act No. 89 of 1998).
Contacting
the Tribunal
The Competition Tribunal
Private Bag X24
Sunnyside
Pretoria 0132
Republic of South Africa
tel: 27 12 394 3300
fax: 27 12 394 0169
e-mail: ctsa@comptrib.co.za
Merger Clearance Certificate
This notice is issued in
terms of section 16 of
the Competition Act.
You may appeal
against this decision to
the Competition
Appeal Court within 20
business days.
1
ANNEXURE A
IN THE LARGE MERGER BETWEEN
SUNSIDE ACQUISITIONS PROPRIETARY LIMITED
AND
NBL INVESTMENT HOLDINGS LIMITED AND DISTELL GROUP HOLDINGS
LIMITED
CASE NUMBER: LM136Dec21
CONDITIONS
1. DEFINITIONS AND INTERPRETATION
1.1 In these Conditions, the following words will, unless otherwise stated or
inconsistent with the context in which they appear, bear the following
meanings and other words derived from the same origins as such words
(that is, cognate words) will bear corresponding meanings:
1.1.1 “Affected Employees” mean the maximum of 166 (one hundred and
sixty six) combined employees of Heineken SA
and Distell, all of whom are above Heineken
SA’s employment grade level 9 and Distell’s
Paterson employee grade level C3 and does
not include any unskilled workers or workers
below the aforesaid grades or workers whose
roles involve working on production lines within
the Production Operations as described in
clause 6.1.2;
1.1.2 “Approval Date” means the date on which the Pr oposed
Transaction is approved by the Tribunal;
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1.1.3 “B-BBEE Act” means the Broad -Based Black Economic
Empowerment Act, No. 53 of 2003;
1.1.4 “B-BBEE Codes” mean the Codes of Good Practice issued in
terms of the B-BBEE Act;
1.1.5 “Business Days” mean any calendar day that is not a Saturday,
Sunday or public holiday in South Africa;
1.1.6 “Calendar Days” mean any day that includes a Saturday, Sunday
or public holiday in South Africa;
1.1.7 “Capevin” means Capevin Holdings Proprietary Limited ,
South African company registration number
1997/020857/07;
1.1.8 “Closing Date” means the date on which the Proposed
Transaction completes in accordance with its
terms;
1.1.9 “Commission” means the Competition Commission of South
Africa, established in terms of section 19 of the
Competition Act;
1.1.10 “Commission Rules” mean the Rules for the Conduct of Proceedings
in the Commission;
1.1.11 "Competition Act” means the Competition Act, No. 89 of 1998 , as
amended;
1.1.12 “Competitively Sensitive Information” includes, but is not limited to,
information relating to:
1.1.12.1 pricing including but not limited to pr icing of
specific products, prices/discounts offered to
specific clients and planned price reductions or
increases;
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1.1.12.2 margin information by product or client;
1.1.12.3 cost information for particular products;
1.1.12.4 information on specific clients and client
strategy, incl uding information with respect to
the sales volumes of clients; and
1.1.12.5 budgets, business plans , and marketing
strategies;
1.1.13 “Conditions” mean these merger conditions to the approval of
the Proposed Transaction issued by the
Tribunal;
1.1.14 “DDT” means the Distell Development Trust (Master's
reference number IT2118/2005);
1.1.15 “Distell” means Distell Group Holdings Limited , South
African company registration number
2016/394974/06;
1.1.16 “Distell Beverages” mean Distell Beverages (RF) Proprietary
Limited, South African company registration
number 2005/005830/07, a wholly owned
subsidiary of DDT;
1.1.17 “Divestiture Period” means 6 (six) months after the Closing Date;
1.1.18 “DTIC” means the Department of Trade, Industry and
Competition of the South African Government;
1.1.19 “Employees” mean any South African citizen who is, in terms
of South African labour law, an employee of any
of the Merger Parties in South Africa, whether
on a permanent or a fixed-term basis, and shall
include the current employees of the business of
the Out-of-Scope Assets, who will be transferred
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to Capevin in terms of the LRA pursuant to the
Distell restructuring implemented as part of the
Proposed Transaction;
1.1.20 “ESOP” means Employee Share Ownership Plan;
1.1.21 “FABs” mean flavoured alcoholic beverages;
1.1.22 “HDP” means a historically disadvantaged person as
contemplated in section 3(2) of the Competition
Act;
1.1.23 “Heineken Group” means the Heineken group of companies ,
comprising Heineken N.V. (incorporated in the
Netherlands with registration number
33011433) and its subsidiaries from (time to
time);
1.1.24 “Heineken SA” means Heineken South Africa (RF) Proprietary
Limited, South African company registration
number 2003/026165/07;
1.1.25 “In-Scope Assets” mean the FABs, wine and spirits businesses of
Distell in South Africa, Namibia, E Swatini,
Lesotho and Botswana , excluding the Out -of-
Scope Assets;
1.1.26 "Key Inputs" mean key production inputs procured by the
Merger Parties, being:
1.1.26.1 raw materials and ingredients: malt, grapes and
wine, dairy, apple juice concentrate, sugar and
sweeteners, compounds and flavours, maize,
barley and hops; and
1.1.26.2 packaging materials: glass, cans, cartons,
closures, crates and labels;
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1.1.27 “Licence” means the trade mark licence for the Strongbow
brand described in clause 2.1.2;
1.1.28 “Licensee” means the acquirer or holder of the Licence, with
no less than 50%+1 shareholding held by HDPs
and shall be independent and not directly or
indirectly related to the Merger Parties, or to any
other directly or indirectly affiliated member of
the Heineken Group;
1.1.29 “LRA” means the Labour Relations, Act No. 66 of 1995;
1.1.30 “Merger Parties” mean the parties to the Proposed Transaction,
being Newco, Distell and NIH;
1.1.31 “Months” mean calendar month and includes Saturday,
Sunday and public holidays;
1.1.32 “Newco” means Sunside Acquisitions Limited , South
African company registration number
2020/811071/06, which will become part of the
Heineken Group on the Closing Date;
1.1.33 “Newco Fair Wage Level” means a fair wage necessary to constitute
a living wage in South Africa;, as described
in clause 6.2.33;
1.1.34 “GEPF” means The Government Employees Pension
Fund;
1.1.35 “NIH” means NBL Investment Holdings Limited;
1.1.36 “Out-of-Scope Assets” mean the distillation, maturation, blending,
bottling, distribution and marketing
operations of inter alia the following Scotch
whiskies and local brands which will be
excluded from the In -Scope Assets: (i)
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Black Bottle, (ii) Bunnahabhain, (iii) Burn
McKenzie, (iv) Deanston, (v) Gordons Gin,
(vi) Scottish Leader, (vii) Tobermory Gin
(viii) Pimms No 1 Cup, and (ix) Ledaig, and
will be held b y Capevin after the Closing
Date;
1.1.37 “Prime Rate” means the prime lending rate (predominant rate)
as published from time to time on the website of
the South African Reserve Bank at:
https://www.resbank.co.za/en/home/what-we-
do/statistics/key-statistics/current-market-rates;
1.1.38 “Production Operations” mean the current proprietary production
and manufacturing operations of the
Merger Parties in South Africa together
with their productive capacity, as set out in
Annexure A. This does not include
production operations relating to the Out -
of-Scope Assets transferred to Capevin
pursuant to the Proposed Transaction;
1.1.39 “Proposed Transaction” means the merger of relevant businesses
of Heineken SA, NIH and Distell (in respect
of the In -Scope Assets) in South Africa,
Namibia and in select markets;
1.1.40 “Rand” or “R” means the South African Rand, the lawful
currency of the Republic of South Africa. For
purposes of determining the value of any
investments set out in these Conditions made by
Newco in foreign currency, such amounts shall
be converted to Rand value at the exchange
rates applicable as at the time such investments
are made;
7
1.1.41 “Remgro” means Remgro Limited, South African company
registration number 1968/006415/06, a public
company listed on the Johannesburg Stock
Exchange;
1.1.42 “SA Co” means the company that will own and control the
combined South African businesses of Newco
on comp letion of the Proposed Transaction
(expected to be Heineken SA);
1.1.43 “SADW” means South African Distilleries and Wines (SA)
Limited, South African company registration
number 1958/000725/06, a wholly owned
subsidiary of Distell;
1.1.44 “SMEs” mean small and medium -sized businesses, as
defined in the Competition Act;
1.1.45 “Strongbow Business” means, cumulatively:
1.1.45.1 the “STRONGBOW” trade marks for South
Africa, Namibia, Botswana, Lesotho and
Eswatini;
1.1.45.2 the “Sale Assets", being all marketing and
other materials relating to the brand held
by Heineken SA at the effective date of the
Licence, including but not limited to glass
bottles, websites, social media accounts,
event collateral, experiential toolkits , and
miscellaneous merchandise assets
relating to the Strongbow brand in South
Africa; and
1.1.45.3 obligations on Heineken SA to support the
Licensee with sales knowledge transfer
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and assistance for the re -contracting of
distributor and client contracts (if and when
required);
1.1.46 “Tavern” means a licensed business premise located in
any township area in South Africa owned and
controlled by HDPs where products of the
Merger Parties are sold and consumed on the
premises;
1.1.47 “Territory” means the territories in which the Licence will
apply, being South Africa, Botswana E Swatini,
Lesotho, and Namibia (and any other countries
as applicable);
1.1.48 “Transitional Services” mean the transitional services that Newco
will provide to the Licensee in respect of
the Strongbow Business to the extent
required by the Licensee, including but not
limited to the following:
1.1.48.1 cider production and packaging services;
1.1.48.2 warehousing and logistics (primary and
secondary logistics) services;
1.1.48.3 sales and marketing support services, including
access to fridges within the distribution network;
and
1.1.48.4 other transitional services (including services
such as returnable bottle tracking, cash
collection, IT and knowledge transfer);
1.1.49 “Tribunal” means the Competition Tribunal of South Africa
established in terms of section 26 of the
Competition Act;
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1.1.50 “Tribunal Rules” mean the Rules for the Conduct of Proceedings
in the Tribunal; and
1.1.51 “Unions” means Food and Allied Workers Union (FAWU),
National Union of Food Beverage Wine Spirits
and Allied Workers (NUFBWSAW),
Inqubekelaphambili Trade Union (ITU), National
Union of Metal Workers South Africa (NUMSA),
and any other relevant trade unions.
1.2 In these Conditions, any definition, wherever it appears, will bear the same
meaning and apply throughout these Conditions unless otherwise stated or
where inconsistent with the context in which it appears.
2. STRONGBOW DIVESTITURE
2.1 Divestiture Overview
2.1.1 Heineken Group will divest its Strongbow Business in South Africa
to the Licensee within the Divestiture Period.
2.1.2 The divestiture of the Strongbow Business will take the form of a
perpetual, royalty -free Licen ce by Heineken Group to an
independent Licensee to exclusively produce, market, distribute
and sell the Strongbow brand in the Territory. For the avoidance
of doubt, apart from the once -off licensing fee payable by the
Licensee at the closing of the divestiture, no ongoing licensing
fees or royalties shall be payable to Heineken Group.
2.1.3 From the Approval Date until the Strongbow Business is divested
to the Licensee, Heineken Group, Heineken SA and/or Newco (as
the case may be) undertakes to:
2.1.3.1 preserve and maintain the economic and competitive value ,
independence and marketability of the Strongbow Business and
brand in the ordinary course of business;
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2.1.3.2 ensure that the Strongbow Business and brand is managed in
the ordinary course of business with reasonable care and skill,
pursuant to good business and commercial practices; and
2.1.3.3 provide sufficient resources for the maintenance of the
Strongbow Business and brand, including implementing ongoing
promotion and advertising in accordance with any approved
business plan, or any existing promotion and advertising
expenditure budget for the Strongbow Business.
2.1.3.4 refrain from carrying out any act outside of the ordinary course
of business that may be of such a nature as to, in a significant
adverse way, alter the economic value or the competitiveness of
the Strongbow Business and brand , or which could alter the
commercial strategy in respect of such business in a significantly
adverse way;
2.1.3.5 take all reasonable steps to not directly or indirectly discourage
any employee of th e Merger Parties from commencing,
continuing or seeking employment with, or providing services to
the Licensee; and
2.1.3.6 take all reasonable steps to ensure that effective on the date of
divestiture, employees of the Merger Pa rties are released from
any non-compete or similar restraint of trade obligation, to the
extent that such an obligation would otherwise prevent the
person from performing his or her contemplated role in relation
to the Divested Business.
2.2 Transitional Services
2.2.1 Following the date that the Licence becomes effective, and to the
extent required by the Licensee, Newco will provide Transitional
Services relating to the production, marketing, distribution and
sale of Strongbow in the Territory, in accordance with any
Transitional Services Agreement to be entered into with the
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Licensee, to preserve and maintain the economic and competitive
value of the Strongbow Business and the Strongbow brand in the
South African market.
2.2.2 The Transitional Services Agreements will specify the duration of
each Transitional Service being supplied, with none of the
services being provided for more than 24 (twenty four) months.
Notwithstanding the above, and at the behest of the Licensee, the
duration of each Transitional Service being supplied may be
extended by a further 12 (twelve)-month period in consultation,
collaboration and agreement with the Commission, the Licensee
and Newco.
2.2.3 The Transitional Services will be provided by Newco to the
Licensee, at a fee calculated on a cost plus and reasonable
margin basis. The provisions of this clause shall apply, mutatis
mutandis, to any agreement governing the provision of the
services referred to in clause 2.2.6 below.
2.2.4 The terms of any Transitional Services Agreements will be subject
to approval by the Commission.
2.2.5 The Licensee or Newco may, on good cause shown and on notice
to the other party, approach the Commission for consent to vary
any terms of any Transiti onal Services Agreements. For this
purpose, “good cause” shall have its normal meaning as
interpreted under the Competition Act and the common law.
2.2.6 For the duration of the Licence, and to the extent required by the
Licensee, the Heineken Group will provide the Licensee with
global marketing and innovation support services in respect of the
Strongbow brand, on terms to be agreed with the Licensee, to
preserve and maintain the economic and competitive value of the
Strongbow brand in the Territory. Such support services should
include, inter alia, written guidelines relating to the marketing of
the Strongbow brand from time to time; the specifications an d
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recipes for the Strongbow products that are being made by the
Heineken Group in other markets; global designs and production
and packaging revisions relating to Strongbow; and any global
advertising campaign assets, at the time they are being developed
by the Heineken Group.
2.2.7 The provisions of clauses to 2.2.4 to 2.2.5 above shall apply,
mutatis mutandis, to any agreement governing the provision of the
services referred to in clause 2.2.6 above.
2.2.8 In order to maintain the structural effect of the divestiture, Newco
or any directly or indirectly affiliated member of the Heineken
Group, will not subsequently terminate the Licence or otherwise
directly or indirectly re -acquire influence or control over the
Strongbow Business, without prior written consent of the
Commission and/or merger control approval as required in terms
of the Competition Act.
2.3 Competitively Sensitive Information
Transitional Services
2.3.1 For so long as Newco provides any Transitional Services as set
out in the Transitional Services Agreements to a Licensee, Newco
will implement measures to ensure that there is no exchange of
Competitively Sensitive Information between the Licensee and
Newco’s executives and managers, as well as Newco’s
employees involved in the marketing , production, packaging,
procurement, distribution and sale of Newco's FAB/cider brands
(Hunter’s and Savanna in particular) in South Africa. These
measures include but are not limited to the following:
2.3.1.1 Newco executives and managers as well as employees of
Newco involved in its FAB/cider brands marketing and sale
operations in South Africa will not be the same employees
involved in the provision of Transitional Services to the
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Licensee (for the avoidance of doubt, separate sales and
marketing teams will be established by the Merger Pa rties to
provide the same level of sales and marketing support
provided to the Strongbow Business and brand pre-merger);
2.3.1.2 Newco executives and managers, as well as employees of
Newco involved in its FAB/cider brands marketing,
production, pac kaging, procurement , distribution and sale
operations in South Africa will sign undertakings not to share
Competitively Sensitive Information with employees involved
in the provision of Transitional Services to the Licensee and
employees of the Licensee, and vice versa; and
2.3.1.3 Newco will implement internal training within 60 (sixty)
Calendar Days to ensure that all its executives and managers,
employees involved in its FAB/cider brands marketing,
production, packaging, procurement , distribution and sale
operations and all employees involved in the provision of any
Transitional Services to the Licensee are aware of and
understand the provisions of the Competition Act that are
relevant to the exchange of Competitively Sensitive
Information between competitors, including section 4 of the
Competition Act (restricted horizontal practices) in particular.
2.3.1.4 Clause 2.3.1.3 shall apply to any new executives and
managers and employees employed from time to time , who
must undergo the competition law training within 60 (sixty)
Calendar Days of appointment.
Global support services
2.3.2 For so long as the Heineken Group provides any global marketing
and innovation support services to the Licensee as contemplated
in clause 2.2.6 above, the Heineken Group will implement
measures to ensure that that there is no exchange of
Competitively Sensitive Information in relation to the Strongbow
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Business and brand or the operations of the Licensee between
executives and managers of the Heineken Group as well as
employees in the Heineken Group involved in the production,
packaging, procurement, marketing, distribution and sale of
Strongbow globally, and executives and managers of Newco and
Newco employees involved in the production, packaging,
procurement, marketing, distribution and sale of Newco’s
FAB/cider brands ( Hunter’s and Savanna in particular) in South
Africa. These measures include but are not limited to the
following:
2.3.2.1 employees in the Heineken Group involved in the global
marketing and innovations as well as production, packaging,
procurement, marketing, distribution and sale of FABs/ciders
brands will not be the same employees involved in the marketing
and innovation as well as production, packaging, procurement,
marketing, distribution and sale of Newco’s FAB/cider brands
(Hunter’s and Savanna in particular), nor should they have any
financial incentive, bonus or targets directly or indirectly linked to
the performance of Newco’s FAB/cider brands – and vice versa;
2.3.2.2 employees in the Heineken Group involved in the global
marketing and innovations as well as production, packaging,
procurement, marketin g, distribution and sale of FABs/ciders
brands, will not participate in commercial forums or act on any
boards which include employees involved in the marketing and
innovation as well as production, packaging, procurement,
marketing, distribution and sale of Newco’s FABs /cider brands
(Hunter’s and Savanna in particular) – and vice versa;
2.3.2.3 to the extent that in the future, innovations and campaigns for
Hunter’s and Savanna are developed internationally with sight of
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Strongbow’s glob al positioning, these will not be shared with
Newco;
2.3.2.4 executives and managers of the Heineken Group as well as
employees involved in the production, packaging, procurement ,
distribution, marketing, innovations and sale of FABs/ciders
brands globally will sign undertakings not to share Competitively
Sensitive Information in relation to any FAB/cider brands
innovation and campaign options available to the Strongbow
brand or the operations of the Licensee with Newco’s managers,
executives, and employees involved in the production,
packaging, procurement, marketing, distribution, innovations
and sale of Newco’s FAB/cider brands (Hunter’s and Savanna in
particular) in South Africa; and
2.3.2.5 the Heineken Group will implement at regular intervals internal
training to ensure that its executives and managers as well as
employees that are involved in the production, packaging,
procurement, marketing, distribution and sale of FABs/ciders
brands globally are aware of and understand the provisions of
the Competition Act that are relevant to the exchange of
Competitively Sensitive Information between competitors,
including section 4 of the Competition Act (restricted horizontal
practices) in particular. Any new executives and managers and
employees employed from time to time , must undergo the
competition law training within 60 (sixty) Calendar Days of
appointment.
Capevin/Out-of-Scope
2.3.3 It is noted that the Heineken Group , while controlling Newco, will
also hold a minority shareholding in Capevin (equal to or less than
36.9%). Given that Newco and Capevin will compete in the spirits
market, the proposed transaction therefore creates structural links
between competitors. To address any anti -competitive concerns
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(to avoid any potential flow of Competitively Sensitive Information)
that might arise due to the structural links, Heineken Group and
Remgro shall put in place measures to ensure that:
2.3.3.1 any representatives appointed to the board of directors of Newco
will not sit on the board of Capevin;
2.3.3.2 board representatives of Newco and Capevin will sign non -
disclosure agreements to ensure that any Competitively
Sensitive Information received is not shared with representatives
of the respective companies;
2.3.3.3 at the level of the respective holding companies, no
Competitively Sensitive Information of a business will be made
available or discussed unless any representatives on the board
of a competing business are recused.
2.4 Monitoring of divestiture condition
2.4.1 Newco will inform the Commission of the successful bidder for the
Licence in writing, no later than 60 (sixty) Calendar Days prior to
the expiry of the Divestiture Period.
2.4.2 In respect of the notification provided for in clause 2.4.1 above,
Newco will submit to the Commi ssion all relevant information
enabling the Commission to confirm that:
2.4.2.1 the Strongbow Business is being divested in a manner
consistent with these Conditions;
2.4.2.2 the proposed Licensee is majority HDP-owned and independent
and not directly or indirectly related to the Merger Parties, or to
any directly or indirectly affiliated member of Heineken Group;
2.4.2.3 the proposed Licensee possesses the financial resources
(including secured internal or third -party funding), p roven
relevant expertise and has the incentive and ability to maintain
17
and develop the Strongbow Business (including the Strongbow
brand in South Africa) as a viable and active competitive force in
competition with the Merger Parties in the FAB/cider/ market in
South Africa;
2.4.2.4 merchandising for the duration of the Transitional Service
Agreements, the Licensee will be given access to space within
fridges which will be in line with Strongbow's share in the 12
(twelve) months preceding the effective date , which for South
Africa is c.39,500 fridges, a minimum of approximately 12% of
fridge space.
2.4.2.5 the terms of the Licence, any Transitional Services Agreements
and any agreement relating to the provision of the services
identified in 2.2.6 above, are appropriate to establish and
maintain the Licensee as a viable and active competitive force in
competition with the Merger Parties in the cider/FAB market in
South Africa.
2.4.3 Newco will provide the Commission with an affidavit deposed to
by a senior official of the proposed Licensee confirming the
accuracy of all information relating to the proposed Licensee.
2.4.4 The Commission will, within 30 (thirty) Calendar Days of receiving
such noti fication, provide Newco with written approval or
rejection of the proposed Licensee, which approval may not be
unreasonably withheld.
2.4.5 In the event that the Commission rejects the proposed Licensee,
it shall provide written reasons for such rejection, and Newco shall
within 60 (sixty) Calendar Days notify the Commission of another
proposed Licensee in writing for the Commission’s approval on
the above basis, which approval may not be unreasonably
withheld.
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2.4.6 Once the Commission has granted its approval of a proposed
Licensee, Newco will provide a copy of the signed Licen ce, any
Transitional Services Agreements and any agreement relating to
the provision of global marketing and innovation support services
in respect of the Strongbow brand, within 15 (fifteen) Business
Calendar Days of the conclusion of such agreement s, to the
Commission for its approval.
2.4.7 For the avoidance of doubt, any acquisition of the Licen ce must
be notified to the Commission , in the prescribed manner and
forms, as a merger filing, irrespective of whether the minimum
merger notification thresholds contemplated in the regulations to
the Competition Act are met.
2.5 Appointment of a Trustee
2.5.1 If Heineken Group is unable to implement the dives titure within
the Divestiture Period, Heineken Group will, with the
Commission’s approval, appoint an independent Trustee to divest
the Strongbow Business
2.5.2 The Trustee will be responsible for the conclusion of a Licen ce
within 6 (six) months from the date o f his/her appointment (the
"Trustee Divestiture Period ") to a Licensee approved by the
Commission.
2.5.3 Heineken Group will propose a Trustee for the Commission’s
approval no later than 1 (one) month prior to the end of the
Divestiture Period. The proposal mu st contain sufficient
information for the Commission to determine whether the Trustee
will be suitable to execute the Trustee’s mandate and will include
inter alia the proposed Trustee’s contact details, experience,
references and employment history.
2.5.4 The Trustee must be independent of Newco and its affiliated
companies, possess the necessary qualifications to carry out
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his/her mandate, and will not have any conflicts of interest. The
Trustee and his/her firm's relationship with the Merger Partie s
during the previous 12 (twelve) months must be disclosed to the
Commission.
2.5.5 The Commission will approve or reject the proposed Trustee
within 20 (twenty) Business Days of the proposal in clause 2.5.3.
Newco will appoint the Trustee within 5 (five) Business Days of
the Commission’s written approval of the Trustee.
2.5.6 If the proposed Trustee is rejected by the Commission, the
Heineken Group shall submit the names of at least 2 (two) more
proposed Trustees within 5 (five) Business Days of being
informed of the rejection. The Commission will choose which of
these Trustees it wishes to have appointed, provided the Trustee
is suitable for the position. If the Commission, acting reasonably,
rejects all further proposed Trustees, the Commission may
nominate a Trustee, who Heineken Group shall appoint within 5
Business (five) Days of being informed by the Commission of such
Trustee’s identity.
2.5.7 Heineken Group will provide a duly executed power of attorney to
the Trustee effective from the date of the Trustee’s appointment.
The power of attorney, which will be consistent with the Trustee’s
mandate (including and subject to these Conditions) and
acceptable to the Commission, must enable the Trustee to
perform all actions which the Trustee considers necessary or
appropriate, including the power to appoint advisors, to litigate for
enforcement of this divestiture condition and to execute the
Trustee’s mandate. A certified copy of the power of attorney will
be submitted to the Commission within 5 (five) Business Days of
the Trustee’s appointment.
2.5.8 All reasonable costs incurred by the Trustee or his/her firm will be
for Heineken Group's account.
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2.6 The Trustee's mandate
2.6.1 The Trustee will ensure that the divestiture is realised by way of
the conclusion of a Licence for the Strongbow brand to a suitable
Licensee. The provisions contained under “Monitoring of
divestiture condition” in clause 2.4 (inclusive of sub -clauses)
above shall apply mutatis mutandis to any divestiture process
executed by the Trustee.
2.6.2 The Trustee's mandate will te rminate on implementation of the
Licence agreement the divestiture of the Strongbow Business
following receipt of competition approval by the Commission or
the Tribunal (as the case may be) . The Trustee will however
inform the Commission in wr iting of the termination of their
mandate within 5 (five) Business Days of the implementation of
the Licence.
3. NEW CAPITAL INVESTMENT AND PRODUCTION COMMITMENTS
3.1 The Merger Parties undertake that:
3.1.1 Newco shall spend a cumulative capital expenditure of R10 billion
(ten billion Rand) over a period of 5 (five) years from the Closing
Date to maintain or grow the aggregate productive capacity of the
Production Operations and related facilities in South Africa;
3.1.2 In addition to the amount referred to in clause 3.1.1, Newco shall
invest an amount of R3.8 billion (three billion eight hundred million
Rand) to plan, develop, construct and commission a new
greenfield brewery in South Africa within 5 (five) years of the
Closing Date with an initial capacity of
and
3.1.3 Newco shall, on the basis contemplated in clause 3, procure that
it or suitably qualified and experienced third parties ( who will be
21
identified within 12 (twelve) months and whose names and
credentials it shall notify in writing to the DTIC o nce selected by
Newco within 18 (eighteen) mo nths) shall invest an amount of
R1.7 billion (one billion seven hundred million Rand) in South
Africa to develop, construct and commission within 5 (five) years
of the Closing Date a greenfield maltery in South Africa with an
initial capacity of
on the understanding that if
such third parties fail to do so for any reason whatsoever, Newco
shall make such investment itself ( in additio n to the amount
referred to in clause 3.1.1) within 5 (five) years of the Closing
Date.
3.2 Newco shall keep the DTIC and the Commission informed of all significant
milestones reached during each stage of the planning, development,
construction and commissioning of the brewery and maltery referred to in
clauses 3.1.2 and 3.1.3 and promptly and fully respond to all queries that
the DTIC and the Commission may reasonably raise in respect thereto.
3.3 In relation to the investments contemplated in this clause 3, the Merger
Parties commit to ensure that Newco shall maximise where reasonable,
and practically and technically feasible, having regard to the technical
nature of the products and services required, the procurement of services
and input materials from SMEs and HDPs in South Africa.
4. ENTERPRISE AND SUPPLIER DEVELOPMENT, LOCALISATION AND
GROWTH
4.1 Local Procurement
4.1.1 During their most recent financial year s Heineken SA and Distell
procured a combined 80.3% (eighty point three per centum) ("the
22
Local Procurement Benchmark Ratio '') of their Key Inputs
(measured by the Rand value of supplies against the Rand value
of total inputs) from suppliers, producers and farmers located in
South Africa, equivalent to approximately R12.5 b illion (twelve
billion five hundred million Rand), as set out in Annexure C.
4.1.2 For each of the first 5 (five) full financial years after the Closing
Date, Newco shall at least maintain the Local Procurement
Benchmark Ratio in respect of its annual local procurement of Key
Inputs and shall take every possible step to increase the Local
Procurement Benchmark Ratio . Thereafter, Newco shall take
every possible step to at least maintain the Local Procurement
Benchmark Ratio. In addition, Newco intends to reduce its annual
foreign procurement of Key Inputs during such period. The
commitments set out in this clause 4.1.2 are made subject to the
provision that such Key Inputs are available at appropriate quality
standards and on reasonably competitive commercial terms.
Reports on such steps shall be included in the annual reports
made by Newco to the DTIC and the Commission in terms of
clauses 8.74 and 8.5.
4.1.3 Notwithstanding the above, Newco shall decrease, through
production efficiencies generated by the Proposed Transaction
and increasing the capacity at Heineken SA's Sedibeng brewery
and building the intended new greenfield brewery referred to in
clause 3.1.2, the share of imports of finished products below 20%
(twenty per centum), after such projects have been implemented
and as far as practicable and commercially feasible, and
acknowledging that short -term market fluctuations and
unforeseen circumstances may temporarily prevent or delay such
decrease. Reports in regard to such percentage shall be included
in the annual reports made by Newco to the DTIC and the
Commission in terms of clauses 8.7 and 8.5.
23
4.1.4 Newco shall train and upskill its South African -based managers
and employees to foster integration with and use of local
procurement by Newco in South Africa.
4.1.5 Where reasonably possible, in cases where third parties supply
goods and services into Newco's South African value chain,
Newco shall engage with such third-party suppliers to encourage
them to commit to sourcing their inputs from South African based
suppliers of goods and services.
4.2 HDP business procurement
4.2.1 Distell and Heineken SA have had a total local procurement from
HDPs amounting to R4.7 billion (four billion seven hundred million
Rand) during their most recent financial year(s) (measured by the
Rand value of such procurement against the Rand value of
combined total local procurement), which equates to
approximately 27.1% (twenty seven point one per centum) of their
combined total local procurement (" the HDP Procurement
Benchmark Ratio").
4.2.2 For each of the first 5 (five) full financial years of Newco after the
Closing Date, Newco undertakes to at least maintain the HDP
Procurement Benchmark Ratio in respect of total local
procurement from HDPs in South Africa and shall take every
possible step to increase the HDP Procurement Benchmark Ratio.
Thereafter, Newco shall take every possible step to at least
maintain the HDP Procurement Benchmark Ratio . Newco's
commitments are subject to such inputs being available from
HDPs at the appropriate quality standards and on reasonably
competitive commercial terms. Reports in regard to such ratio
shall be included in the annual reports made by Newco to the
DTIC and the Commission in terms of clause 8.4 and 8.5.
24
4.3 Supplier Development Fund
4.3.1 Newco shall establish a new ringfenced Supplier Development
Fund and contribute R 400 million (four hundred million Rand)
over 5 (five) years from the Closing Date to that Fund for
investment in SMEs and HDP -controlled suppliers to Newco (for
the avoidance of doubt, this may include programmes that extend
beyond the 5 (five)-year period, e.g., long -term loans / funding
opportunities subsidised by Newco to promote longevity of the
Fund), with a focus on:
4.3.1.1 agriculture – Newco shall work in partnership with the
Department of Agriculture, Land Reform and Rural Development
to support HDP farmers to join and increase their participation in
the agricultural value chain in South Africa including the barley
value chain, introducing new varieties and supporting farmers to
increase efficiency and yields which will include the
establishment of 2 (two) model farms to empower and upskill
HDP farmers and other local commercial farmers in the area of
best-in-class crop management in order to improve their yields,
incomes and to reduce greenhouse emissions and water usage;
4.3.1.2 research and development (“R&D”) – in order to strengthen
the South African technological and innovation base, Newco
shall invest in and utilise R&D and technology developed by, in
or for South Africa, to improve the productivity of emerging
farmers, working in collaboration with uni versities and/or other
institutions within South Africa's innovation system;
4.3.1.3 complementary businesses – Newco shall investigate and
implement new business opportunities which will serve to
complement the activities of Newco’s model farms, HDP farmers
and commercial farmers, including agro-production, processing,
storage, logistics and transportation, marketing, and seed /
25
fertilizer / chemical distribution, or any other activities of Newco's
business; and
4.3.1.4 Black women -owned and controlled businesses – Newco
shall support development in Newco's value chains, including
technical coaching and business development support, with
particular regard to local agricultural production, processing and
manufacturing, to assist Black woman -owned and controlled
businesses to benefit from the planned increase in procurement
from HDP businesses referred to in clause 4.2.2.
4.3.2 Responsibility for the administration and management of the
Supplier Development Fund will vest in Newco. Newco shall
report annually to the Commission on the investment in SMEs and
HDP-controlled suppliers to Newco.
4.3.3 Newco shall design and implement proje cts and identify
beneficiaries in line with the objectives of the Supplier
Development Fund and consistent with the principles of long-term
sustainability. Newco shall however actively consult with the
DTIC to ensure that funds are directed to strategical ly important
projects.
4.3.4 To this end, Newco , the Unions and the DTIC shall establish a
consultative board (" SD Consultative Board "), comprising
representatives of Newco , the Unions and the DTIC having
sufficient expertise to give guidance in relation to the specific
types of programmes referred to in this clause.
4.3.5 The SD Consultative Board shall:
4.3.5.1 be comprised of 2 (two) representatives appointed by each of
Newco and the DTIC; and 1 (one) representative appointed by
the Unions. Newco, the DTIC and the Unions may remove and
replace their own respective appointees;
26
4.3.5.2 meet as and when it so determines, but not less than once per
annum, with a view to consult and make recommendations on
the implementation of the Supplier Development Fund as well as
advise Newco on the means and mechanisms to fulfil the
objectives of the Fund;
4.3.5.3 be a forum for consultation between the South African
Government and Newco and provide guidance to Newco on
which programme s the Supplier Development Fund shall
support. When considering any programmes to be supported by
the Supplier Development Fund, the SD Consultative Board
shall be guided by the achievement of the objectives of the fund
and the best long-term interests of South Africa; and
4.3.5.4 be entitled to call for and receive reports and presentations from
Newco regarding the investments and programmes supported
by the Supplier Development Fund.
4.3.6 The amounts in the Supplier Development Fund shall be made
available to be dis bursed in equal annual portions over the 5
(five)-year period from the Closing Date (i.e., R 80 million (eighty
million Rand) per annum).
4.3.7 For the avoidance of doubt, the amounts to be invested into and
disbursed by the Supplier Development Fund shall be incremental
to any committed expenditure on the part of Newco. In particular,
such expenditure shall be over and above any pre -existing
planned corporate social investment expenditure on the part of
the Merger Parties, as set out in Annexure B.
4.3.8 No administration fees or other costs may be deducted from the
aggregate value of the Supplier Development Fund.
4.3.9 The Supplier Development Fund shall b e entitled to use a
combination of instruments to support individual projects in the
most appropriate way, building on the work already done by the
27
Merger Parties in these areas. These instruments may include
development funding loans, commercial loan gua rantees, direct
grants and technical assistance, skills development and training,
including measures to extend the Supplier Development Fund
beyond the 5 (five)-year period.
4.4 Localisation and Growth Fund
4.4.1 In addition to, and distinct from the Supplier Devel opment Fund,
and to ensure that the Proposed Transaction will have a positive
impact on the relevant industrial sectors and regions, and
advance the inclusion and expansion of HDPs and SMEs in the
market(s), Newco will support the South African Government’s
economic recovery plan (tabled by the President in Parliament in
October 2020) by contributing R 200 million (two hundred million
Rand) over 5 (five) years from the Closing Date to a ringfenced
Localisation and Growth Fund with the objective to support further
localisation initiatives that will drive future economic growth in
South Africa. For the avoidance of doubt, this may include
programmes that extend beyond the 5 (five) -year period, e.g.,
long-term loans / funding opportunities subsidised by Newco to
promote longevity of the Fund.
4.4.2 The Localisation and Growth Fund will prioritise HDP businesses
and be open to businesses beyond Newco's direct value chain.
4.4.3 The amounts in the Localisation and Growth Fund shall be made
available to be disbursed in equa l annual portions over the 5
(five)-year period (R 40 million (forty million Rand) per annum).
4.4.4 Responsibility for the administration of the Localisation and
Growth Fund will vest in Newco. The Localisation and Growth
Fund shall be managed by the SD Consultative Board as
contemplated in clauses 4.3.4 and 4.3.5, mutatis mutandis, save
that the SD Consultative Board's decisions as to which
strategically-important programmes and projects are to be funded
28
by the Localisation and Growth Fund, shall be tak en jointly and
consensually by Newco , the Unions and the DTIC, and shall
therefore be binding on Newco.
4.4.5 For the avoidance of doubt, the amount s to be invested into and
disbursed by the Localisation and Growth Fund shall be
incremental to any committed expenditure on the part of the
Merger Parties. In particular, such expenditure shall be over and
above any pre -existing planned corporate social i nvestment
expenditure on the part of the Merger Parties.
4.4.6 No administration fees or other costs may be deducted from the
aggregate value of the Localisation and Growth Fund.
4.5 Tavern Transformation Programme
4.5.1 Newco shall invest R 175 m illion (one hundred and seventy-five
million Rand) incremental to the planned expenditure by Distell
and Heineken SA prior to entering into the Proposed Transaction
in an amount of over a 5 (five)
year period from the Closing Date to support around 1 000 (one
thousand) Tavern owners to create safe, responsible and
sustainable businesses with a positive impact for consumers and
society.
4.5.2 The focus areas will be to support Taverns with the following:
4.5.2.1 investment to significantly improve facilities at the Taverns to
ensure safety of patrons (including sanitation);
4.5.2.2 converting of Taverns into higher quality, multi -occasion outlets
offering consumers an experience centred around moderation of
consumption of alcoholic beverages;
4.5.2.3 supporting t he introduction of multiple income streams at
Taverns including food and non-alcoholic alternatives to improve
29
the sustainability of Taverns while supporting responsible
consumption;
4.5.2.4 ensuring that sale and/or consumption of alcoholic beverages by
under-age individuals do not take place at Taverns.
4.5.3 Newco must within 90 (ninety) Calendar Days of the Closing Date,
submit a detailed plan to the Commission and the DTIC setting
out how it intends to implement the Tavern Transformation
Programme and achieve its objectives.
4.5.4 Newco will aim to leverage the investment referred to in clause
4.5.1 through partnerships with other suppliers and service
providers to the Taverns to bring additional value -add support to
Tavern owners including food service, training, business skills
coaching, digital infrastructure; and money market services to
reduce costs.
4.5.5 Newco estimates this investment could support the creation of
around 1 500 (one thousand five hundred) new jobs as these
Taverns are able to add additional value, increase their revenu e
streams and grow their businesses.
4.5.6 Newco shall proactively engage with liquor licensing authorities
whose support will be critical to achieving these positive impacts.
4.5.7 Newco shall not require any Tavern which receives funds or
investments in terms of Ne wco's Tavern Transformation
Programme to purchase exclusively from Newco or favour the
purchase of Newco's products to the exclusion of Newco's
competitors.
4.5.8 Newco shall maintain ongoing detailed records of the expenditure
of the investment referred to in clause 4.5.1 and the improvements
at Taverns that have resulted from such expenditure. Such
30
reports shall be included in the annual reports made by Newco to
the DTIC and the Commission in terms of clauses 8.4 and 8.5.
4.5.9 Tavern supply chain opportunities – Newco shall investigate
and implement new business opportunities for HDP and SME
owned suppliers to minimise any risk of displacement of existin g
HDP and SME distributors to Taverns, with the aim of inter alia
promoting HDP and SME involvement in distribution to outlets,
and/or supporting Taverns in negotiating terms with other third -
party suppliers to Taverns.
4.6 Innovation, Research and Development Hub
4.6.1 Newco commits to the establishment of an Innovation, Research
and Development Hub for the Africa region based in South Africa
("the Innovation Hub ") within 5 (five) years of the Closing Date .
The Innovation Hub will be a centre for excellence for Newco and
the wider Heineken Group's innovation in spirits and fruit -based
beverage products.
4.6.2 The purpose of the Innovation Hub is to accelerate and scale the
Heineken Group’s capability. The Innovation Hub will focus on:
4.6.2.1 product and technical R&D for wines, spirits, ciders and non-
alcohol containing beverages;
4.6.2.2 extended commercialisation opportunities for the above -
mentioned categories into new Heineken Group markets
outside of Southern Africa; and
4.6.2.3 development of new business opportunities for the region
outside of its current core business.
4.6.3 The Innovation Hub will function using an agile resourcing model
and will contract specific expertise for key projects and initiatives.
This will be achieved through a partnering approach with specific
31
subject matter experts, research institutions, start -up incubators
and individual start-ups with access to proprietary technology.
4.7 Export promotion
4.7.1 In order to ensure that the Proposed Transaction will have a
positive impact on the ability of national industries to compete in
international markets, Heineken SA will make Newco an export
hub in South Africa for Newco's products supplied to 10 (ten)
markets in Africa beyond South Africa and, Namibia and Kenya,
thereby benefiting production and procurement in South Africa. In
this regard, Newco commits to increase exports of South African
manufactured products within a period of 5 (five) years from the
Closing Date. Reports on such endeavours shall be included in
the annual reports made by Newco to the DTIC and the
Commission in terms of clauses 8.4 and 8.5.
5. TRANSFORMATION AND OWNERSHIP
5.1 The DDT
5.1.1 Pre-merger, Distell has a B-BBEE ownership scheme in place, in
terms of which Distell Beverages holds a 15% (fifteen per centum)
shareholding in SADW, a Distell subsidiary that holds, inter alia,
all of Distell’s South African business, as well as a 1.2% (one point
two per centum) direct shareholding in Distell.
5.1.2 In relation to the In-Scope Assets, as soon as practicable following
implementation of the Proposed Transaction, the DDT, via Distell
Beverages, will obtain a fully voting shareholding interest in SA
Co. The exact shareholding of the DDT though Distell Beverages
in SA Co will be determined as part of the closing mechanics for
the Proposed Transaction but shall, when combined with the
shareholding of the ESOP referred to in clause 5.2, not be less
than 15% (fifteen per centum) and is expected to be
approximately 9% (nine per centum) which equates to a value of
32
approximately R4.8 billion (four billion eight hundred million
Rand). Such shareholding and voting rights shall not be reduced
or diluted for a period of no less than 5(five) years after the Closing
Date.
5.1.3 For the avoidance of doubt, as a result of the DDT retaining its
15% (fifteen per centum) shareholding in SADW, the Out -of-
Scope Assets will continue to have a 15% (fifteen per centum) B-
BBEE ownership scheme which will not be negatively impacted or
diluted as a result of the Proposed Transaction.
5.1.4 The DDT / Distell Beverages shall be entitled to appoint 1 (one)
person to the board of directors of SA Co.
5.1.5 No additional funding will be required from the DDT as a result of
the Proposed Transaction. Newco shall use its best endeavours
to restructure the current funding structure of the DDT within 12
(twelve) months after the Clo sing Date, which will increase the
trickle dividend and cash flow to the DDT from SA Co. Newco shall
report to the DTIC and Commission on such restructuring in its
annual reports referred to in clauses 8.4 and 8.5.
5.2 Employee Share Ownership Plan ("ESOP")
5.2.1 Within 3 (three) months after the Closing Date, the Merger Parties
shall establish a new evergreen/perpetual ESOP that will hold a
fully voting shareholding of approximately 6% (six per centum) in
SA Co (which equates to a value of approximately R3.5 billion
(three billion five hundred million Rand), for the benefit of the
South African Employees of SA Co (a majority of which shall
always be HDPs).
5.2.2 For avoidance of doubt, the Employees of the Merger Parties who
will be transferred (in terms of the LRA) to Capevin with the Out-
of-Scope Assets, pursuant to the Distell restructuring
33
implemented as part of the Proposed Transaction , will benefit
from the ESOP.
5.2.3 The Employees of the Merger Parties who will be transferred to
Capevin with the Out -of-Scope Assets, will not lose any benefits
of the ESOP by virtue of the transfer.
5.2.4 The new ESOP and the existing DDT shall together achieve a B-
BBEE effective ownership and voting interest in SA Co of no less
than 15% (fifteen per centum). Such shareholding and voting
rights shall not be reduced or diluted for a period of no less than
5 (five) years after the Closing Date.
5.2.5 Employees that form part of senior management will not be
eligible to join the ESOP.
5.2.6 The Merger Parties shall ensure that the ESOP shall be structured
in accordance with the B -BBEE Codes and incorporate the
following principles:
5.2.6.1 Equal allocation (all Employees treated equally in terms of voting
and economic participation with no differentiation across
Employee grades).
5.2.6.2 The funding of the ESOP shall be fully facilitated through a
notional vendor funding mechanism, with the funding rate being
no more than the Prime Rate minus 1.5% (one point five per
centum).
5.2.6.3 No upfront contribution to be required from Employees to
participate in the ESOP.
5.2.6.4 A fixed trickle dividend of 55% (fifty-five per centum) shall be paid
out on an annual basis.
5.2.6.5 The ESOP will be entitled to appoint 1 (one) person to the board
of directors of SA Co.
34
5.2.6.6 The trustees of the ESOP shall be selected by the Employees of
SA Co, except for 1 (one) trustee who shall be appointed by the
board of directors of SA Co.
5.2.6.7 The ESOP and DDT shall enter into good faith negotiations with
Newco, to be completed within 6 (six) months of the Closing
Date, to execute a shareholders’ agreement in respect of SA Co
to provide for appropriate minority protection for the ESO P and
DDT (with no veto rights and without impeding the day -to-day
operations of SA Co and any of its commercial or growth
initiatives).
5.2.7 The costs of establishing and administering the ESOP and
implementing the acquisition of the SA Co shareholding shall not
be borne by the ESOP but shall be borne by SA Co . For the
avoidance of doubt, the reasonable costs of expert advisors and
representatives of the Unions in relation to establishing and
administering the ESOP will be borne by the SA Co/Newco.
6. EMPLOYMENT AND EMPLOYMENT-RELATED CONDITIONS
6.1 Employment guarantee
6.1.1 For a period of 5 (five) years following the Closing Date , Newco
shall maintain the total aggregate number of all employees of the
Merger Parties in South Africa as at the Approval Date which
number Newco shall advise the Commission, the Unions and the
DTIC within 7 (seven) Calendar Days of the Closing Date.
Compliance with this condition shall be annually measured from
the second to the fifth anniversary of the Closing Date.
6.1.2 No Employees, whether South Afri can citizens or not, as at the
Approval Date other than the maximum number of Affected
Employees may be retrenched. Without derogating from clause
6.1.1, no employees of the Merger Parties whose roles, as at the
Approval Date, involve working on production lines within the
35
Production Operations, shall be retrenched as a result of the
Proposed Transaction. For the sake of clarity, the roles that
involve working on production lines include machine technicians.
6.1.3 Subject to clauses 6.1.1 to 6.1.2 above , to the extent that any
retrenchments of the Affected Employees (above the specified job
grades and not involved in working in the abovementioned
production lines ) are required as a result of the Proposed
Transaction, such retrenchments shall not exceed a maximum of
166 (one hundred and sixty six ) Affected Employees within a
period of 5 (five) years from the Closing Date, and such
retrenchments will be effected in line with applicable labour
legislation. For the sake of clarity, Newco shall replace the number
of retrenched Affected Employees withi n 6 (six ) months of the
retrenchment in order to maintain the aggregate employee
headcount of the Merger Parties in terms of clause 6.1.1.
6.1.4 In maintaining the aggregate employee headcount of the Merger
Parties during the 5 (five) year period following the Approval Date
as required in clause 6.1.1, Newco shall use its best endeavours
to replace the number of any Affected Employees who were
employed on a permanent basis or on a fixed-term contract, with
permanent employees of the Merger Parties. Newco shall report
on these endeavours to the Commission, the Unions and DTIC in
terms of clauses 8.4, 8.5 and 8.6.
6.1.5 Prior to retrenching any Affected Employees, the Merger Parties
must provide the Commission in writing with a detailed description
of the Affected Employees to be retrenched, a detailed
explanation of how the duplications arose and why retrenchments
are necessary.
6.1.6 Newco must put in place suitable and appro priate measures to
mitigate the consequences of any potential retrenchments of the
Affected Employees by:
36
6.1.6.1 offering potentially Affected Employees voluntary separation
arrangements, early retirement packages, and transfers to other
reasonable alternative positions, to limit the need for involuntary
retrenchments;
6.1.6.2 providing funding to re -skill any Affected Employees in an
amount of R 40 000 ( forty thousand Rand) per retrenched
Affected Employee;
6.1.6.3 providing counselling and guidance on applying for alternative
employment; and
6.1.6.4 for a period of 3 (three) years following their retrenchment,
offering any Affected Employees preferential consideration for
re-employment by Newco or its subsidiaries subject to final
agreement on terms and conditions of employment.
6.1.7 The Merger Parties shall in its annual reports to the Commission
report inter alia the following:
6.1.7.1 Of the maximum number of Affected Employees, the
number of Affected Employees that:
6.1.7.1.1 accepted voluntary separation arrangements;
6.1.7.1.2 accepted early retirement packages; and
6.1.7.1.3 were transferred to other reasonable alternative
positions.
6.1.7.2 The ultimate number of involuntary retrenchments in ter ms of
clause 6.1.11;
6.1.7.3 the number of Affected Employees that received reskilling, and
the nature and cost of that reskilling per Affected Employee.
6.1.8 For the avoidance of doubt, "retrenchments" as contemplated in
clause 6.1.3 do not include:
37
6.1.8.1 voluntary separation arrangements;
6.1.8.2 voluntary early retirement packages;
6.1.8.3 unreasonable refusals to be redeployed in accordance with the
provisions of the LRA;
6.1.8.4 resignations or retirements in the normal course;
6.1.8.5 terminations in the normal course of business, including but not
limited to, dismissals as a result of misconduct or poor
performance; and
6.1.8.6 necessary steps taken by Newco in terms of section 189 of the
LRA, should operational requirements in the ordinary course of
business that are not merger -specific (i.e. not related to or as a
result of the Proposed Transaction) necessitate that such steps
be taken.
6.1.9 Distell employees currently involved in the “Out-of-Scope Assets”
(excluding those based overseas) will have an election to
transfer to Capevin's South African operations, or to remain with
the Merged Entity. Until Heineken potentially acquires a minority
stake in Capevin, there will be no negative effect on any
employees who elect to transfer to Capevin's South African
operations.
6.1.10 Distell employees involved in the “Out-of-Scope Assets” who elect
to transfer to the South African operations of Capevin will transfer
in terms of section 197 of the LRA and, therefore, on terms and
conditions of employment that are, on the whole, not less
favourable than their existing terms.
6.1.11 Other than the retrenchments of Affected Employees
contemplated in clause 6.1.3, where Newco retrenches any
Employee in South Africa within a period of 5 (five) years after the
Closing Date, the retrenchment will be presumed to be as a result
38
of the Proposed Transaction, unless Newco can demonstrate
otherwise. Any retrenchments after 5 (five) years after the Closing
Date will not be presumed to be as a result of the Proposed
Transaction and the normal rules of evidence applicable in the
Tribunal will apply in the event of a dispute.
6.2 Fair wages
6.2.1 Newco shall adopt a policy of paying fair wages (in line with the
spirit and purport of the Basic Conditions of Employment Act, No.
75 of 1997 and the LRA ) for all employees of Newco using an
independent and transparent measure (such as that of the Fair
Wage Network (FWN)1 - See https://fair-wage.com/) to ensure
that the amount needed to afford a decent standard of living is
guaranteed and is not dependent on variable factors like working
overtime or incentives.
6.2.2 Heineken SA and Distell will use their best endeavours to ensure
that seasonal workers , outsourced, permanent, and temporary
employees of any independent contractors to which it outsources
any of its services are paid fair wages, as set out more fully below.
6.2.3 Newco Fair Wage Level and Newco Employees
6.2.3.1 Within 3 (three) months of the Closing Date, Newco will conduct
an internal assessment to determine whether all employees of
Newco or its subsidiaries are paid at or above the Newco Fair
Wage Level . Following this assessment, Newco will take
immediate st eps to ensure that no employee of Newco or its
subsidiaries will be paid below the Newco Fair Wage Level.
1 FWN is an independent, international non -government organisation, which provides data on fair
wage benchmarking over approximately 200 countries. They have over 12 years of experience, are widely
published, and seen as the benchmark by Fair Wage Association and International Labour Organisation (ILO).
39
6.2.4 Newco Fair Wage Level and Outsourced Service Providers
6.2.4.1 Within 3 (three) months, where Heineken SA contracts directly
with Outsourced Service Providers (“OSPs”), it will apply the
following to Newco and its subsidiaries:
6.2.4.1.1 Identify all OSPs that supply labour-based services
to sites owned, managed, or controlled by Newco or its
subsidiaries, and corresponding Non -Employee Workers
("NEWs") for example, catering, cleaning, security, or store
merchandisers;
6.2.4.1.2 Request payroll data of all NEWs, validated through
external social compliance audits, including confidential
interviews with NEWs;
6.2.4.1.3 Compare existing NEWs annual base salaries,
fixed guaran teed allowances, and cash equivalent of
benefits against a fair wage necessary to constitute a living
wage in South Africa; and
6.2.4.1.4 where any deficiencies are found, discuss the delta
between current compensation and the Newco Fair Wage
Level with the OSP and encourage the OSP to pay its
employees a fair wage necessary to constitute a living
wage in South Africa.
6.2.4.1.5 Using its best endeavours and influence, Newco will
work with OSPs on an ongoing basis to ensure that OSPs
pay their employees a fair wage necessary to constitute a
living wage in South Africa.
6.2.5 Workers employed or contracted on farms and cooperatives
supplying inputs to Newco
6.2.5.1 On third-party farms and cooperatives directly supplying Newco,
products to Newco ("direct sourcing farms and cooper atives"),
40
the Merger Parties lack direct control to define contractual
agreements between the farms and the OSPs who supply
permanent, temporary, or seasonal labour to those farms.
However, the Merger Parties recognise the opportunity to
positively influe nce the lives and livelihoods of these workers
and labour practices in the industry more broadly. Newco will on
an ongoing basis:
6.2.5.1.1 work with all direct sourcing farms and cooperatives
to share best practice and benefits of paying a fair wage
necessary to co nstitute a living wage in South Africa ,
including the prevailing Newco Fair Wage Level as a
reference, and tools to calculate total compensation of
employees (annual based salary, fixed allowances, and
cash equivalent of benefits, such as accommodation and
transport); and
6.2.5.1.2 update all sourcing agreements, stipulating the
expectation that direct sourcing farms and cooperatives
strive to pay labour employed directly or indirectly a fair
wage necessary to constitute a living wage in South Africa.
6.3 Merger Parties’ commitment to safe and dignified work
6.3.1 Both Heineken and Distell have comprehensive and well -
established Human Rights Policies which guide them to
understand, avoid and address human rights -related risks.
Heineken’s policy will be applied to Newco.
6.3.2 In compliance with international standards including the
Universal Declaration of Human Rights, the Declaration on
Fundamental Principles and Rights at Work of the International
Labour Organization , the Guidelines for Multinational
Enterprises of the Organisation for Economic Cooperation and
Development and the United Nations Guiding Principles on
Business and Human Rights. Newco will on an ongoing basis:
41
6.3.2.1 work with Distell farms and all direct sourcing farms and
cooperatives to understand, avoid and address risks associated
with human rights; and
6.3.2.2 to update all sourcing agreements to reflect a commitment to
human rights standards, includin g providing for adequate
sanitation facilities in the vineyards for workers , protection of
farm workers from highly hazardous pesticides , adequate
personal protective equipment (PPE) and safe transportation.
6.3.3 Investigation of allegations regarding OSP’s conduct
6.3.3.1 Within 3 (th ree) months of the Closing Date, Newco will
undertake an investigation into the allegations raised by
witnesses before the Tribunal regarding distribution OSPs (being
Liquor Runners and Vericon), and take all action required to
ensure that these suppliers comply with all service level
agreements and Heineken Human Rights Policy (and future
Newco policies), to ensure a safe and dignified working
environment for all temporary workers connected to Newco.
Where any other complaints against other OSP ’s treatment of
outsourced, seasonal and temporary workers are raised with
Newco, these will also be investigated. In line with policy and
industry standards, following an investigation appropriate action
will be taken proportionate to the findings. This ma y include,
where applicable, disciplinary measures against an implicated
person, termination of supply agreements and support for
victims.
6.3.4 Inventory assessment of Newco ’s operations and labour -
based procurement practices
6.3.4.1 Within 3 (three) months of the Closing Date, Newco will conduct
an inventory assessment of all Newco owned, managed, or
leased operations (including farms), and the labour -based
procurement practices currently in place at its operations. This
42
inventory assessment will help to understand the (i) recruitment;
(ii) management; (iii) workplace; and (iv) termination procedures
of all labour, and labour -based services, be it permanent,
temporary seasonal, or outsourced labour.
6.3.5 Audit of compliance in farms owned by and supplying to
Newco to continue to raise industry standards
6.3.5.1 Within 3 (three) months of the Closing Date, Newco shall provide
the Commission with a list of all farms that it directly and
indirectly sources from.
6.3.5.2 Within 6 (six) months of the Closing Date Newco shall:
6.3.5.2.1 conduct an audit of the working conditions of all
permanent employees, non -employee workers employed
by OSPs who deliver labour-based services on these sites,
and any other temporary or seasonal workers, where
applicable, on farms wholly owned by Distell (currently, the
JC Le Roux and Nederburg wine farms). This audit will
assess working conditions on Distell farms against legal
requirements and international standards, in particular (i) a
fair wage necessary to c onstitute a living wage in South
Africa (as provided for in clause 6.2), (ii) reasonable
working hours, (iii) safe and dignified work environment ,
and (iv) health and safety standards; and
6.3.5.2.2 conduct a representative sample audit of other
South African wine farms which directly or indirectly supply
products to Newco. This audit will assess conditions for
employees and temporary workers against Newco’s
Supplier Code of Conduct and the recommendations of the
audit of its owned farms and will include an assessment of
the most effective measures to improve security of
employment for outsourced, temporary, and seasonal
workers at Distell and third-party farms.
43
6.3.5.3 The audits will be conducted in partnership with a highly
respected and independent third -party organisation, accredited
by the Association for Professional Social Compliance Auditors.
6.3.5.4 Newco will ensure that its policies and practices meet the highest
industry standards possible and, in partnership with industry
bodies, be used as best practice to be shared and supported in
the broader wine industry. To ensure this Newco will publish a
summary of its findings and recom mendations to raise
awareness of issues and promote higher standards across the
industry on its website. Newco will also provide the findings and
recommendations to the Commission . Newco will also engage
with all its direct suppliers in the wine value chai n and continue
to work with longstanding partners, the Sustainable Agriculture
in South Africa (SIZA) initiative and the Wine & Agricultural
Ethical Trade Association (WIETA) and other stakeholders,
including the W omen on Farms Project (WFP) , to collective ly
work towards ensuring safe and dignified work for all people in
the industry.
6.3.6 Anonymous reporting line:
6.3.6.1 Newco will work with its OSPs in educating outsourced,
seasonal and temporary workers on their rights, and establish
and promote an anonymous communication line for reporting
any instances of wrong-doing. Newco will not tolerate any form
of retaliation against people for speaking up about potential
misconduct.
6.3.6.2 Where any non-compliance, deficiencies or abuses in respect of
payment of f air wages, working conditions and/or respect for
workers' Human Rights are identified, Newco will take
appropriate corrective actions to rectify these as soon as
practicable, where these are in the direct control of Newco. In
44
the case of indirect activities of OSPs, Newco will ensure
compliance from its OSPs and direct sourcing farms.
6.3.7 Support for outsourced, temporary and seasonal workers
6.3.7.1 Newco will further propose to the SD Consultative Board that
female HDPs – who are outsourced, temporary and seasonal
farm workers, or employees of other OSPs to Newco benefit
directly or indirectly from the Supplier Development Fund
(referred to in clause 4.3.1) to support its suppliers to maintain
the highest industry standards. Newco will further work with the
DDT on its existing and future pr ojects that directly benefit
female HDPs.
6.3.7.2 Newco will report to the Commission , the DTIC and the Unions
on all investigations, audits and substantive actions taken in
terms of this clause 6.3, in its annual reports in terms of clause
8.
6.4 Harmonisation
6.4.1 Any employees of the Merger Parties transferred to Newco
following the merger shall be transferred on terms and conditions
of employment (including wages, working conditions and benefits)
that are as a whole no less favourable than their current terms and
conditions of employment, in accordance with the provisions of
the LRA.
6.4.2 Newco shall use its best endeavours to complete all collective
bargaining p rocesses within 12 (twelve) months of the Closing
Date, to harmonise wages, working conditions and benefits
across the different entities forming part of Newco. The
harmonisation process shall be undertaken in consultation with
the Unions.
45
6.4.3 Newco will report to the Commission and DTIC on all actions
taken in terms of this clause 6.4, within 20 (twenty) Calendar Days
of the completion of the harmonisation process.
6.5 Head office
Newco shall remain incorporated and headquartered in South Africa and
place operational and strategic responsibility in the hands of local
management in South Africa, while benefiting from the scale and support
of Heineken Group's global operations. Newco shall remain a tax resident
of South Africa.
7. HEINEKEN GROUP'S "BREW A BETTER WORLD" INITIATIVES
7.1 Newco will continue to accelerate the sustainability efforts of both Distell
and Heineken SA to protect the environment, support local communities
and make a positive contribution to society and make a greater impact in
the next decade.
7.2 Newco will implement the following initiatives:
7.2.1 Carbon Neutrality – aiming for net zero emissions in production
by 2030 and carbon neutral ity across the value chain by 2040.
Heineken SA is investing at scale to build renewable energy
capacity, with Sedibeng due to become Africa’s largest solar
brewery with the construction of a 6.5MW (six point five
MegaWatt) solar project by mid -2022, supporting up to
approximately 200 (two hundred) jobs during the construction
phase. In addition to reducing Heineken S A’s carbon footprint,
the project will substitute significant power requirements from the
wider public electricity grid. This investment builds upon the strong
track record of Distell on solar energy including the recent
completion of four new solar photovoltaic (PV) facilities. Newco
will continue to invest in renewable energy technology to meet the
net zero emissions target across combined production facilities
and with its value chain partners.
46
7.2.2 Maximise Circularity – committing to zero waste to landfill by
2025 and to increasing the use of returnable packaging;
7.2.3 Towards Healthy Watersheds – committing to continued
improvements in water efficiency to reduce water use in
production. By 2030 Newco will fully balance all the water used
in its products in water stressed areas ( i.e. Newco will return to
the local watershed the water that it uses in the production of
products);
7.2.4 Always a Choice – ensuring that consumers always have a
choice through broadening the availability of zero alcohol
beverages;
7.2.5 Harm Reduction – continuing Heineken SA and Distell’s current
spend on projects and partnerships with a proven impact on
behavioural change and reducing alcohol related harm, alongside
investment in responsible consumption campaigns. This is
equivalent to an investment of R400 million (four hundred million
Rand) over a period of 5 (five) years;
7.2.6 Social impact projects – committing to community support
investments including Water Sanitation & Hygiene (WASH)
projects; and
7.2.7 Inclusion and diversity – participating in Heineken Group's
initiative to increase the number of women represented in senior
management in South Africa.
8. MONITORING
8.1 Newco will circulate a non -confidential version of the Conditions to all
employees of the Merger Parties, employees' representatives, and Unions
within 10 (ten) Calendar Days of the Approval Date.
8.2 As proof of compliance with clause 8.1, the Merger Parties will within 5 (five)
Business Days of circulating the Conditions, submit to the Commission an
47
affidavit by a senior officia l of Newco attesting to the circulation of the
Conditions and provide a copy of the notices that were circulated to the
employees, employees' representatives and the Unions.
8.3 Newco will notify the Commission in writing of the implementation of the
merger within 10 (ten) Calendar Days of the Closing Date. This notice will
include an affidavit attested to by a senior official of Newco which provides
the total number of Employees that are employed by Newco in South Africa
as at the Closing Date.
8.4 Within 45 (forty-five) Calendar Days of each anniversary of the Closing Date
up until the 6th (sixth) anniversary of the Closing Date, Newco shall provide
to the Commission a suitable and appropriately detailed annual report
regarding Newco’s compliance with these Conditions.
8.5 Within 45 (forty-five) Calendar Days of each anniversary of the Closing Date
up until the 6th (sixth) anniversary of the Closing Date, Newco shall provide
to the DTIC a suitable and appropriately detailed annual report regarding
Newco’s compliance with clauses 3, 4, 5, 6 and 7 of these Conditions.
8.6 Within 45 (forty-five) Calendar Days of each anniversary of the Closing Date
up until the 6th (sixth) anniversary of the Closing Date, Newco shall provide
to the Unions a suitable and appropriately detailed annual report regarding
Newco’s compliance with clauses 5 and 6 of these Conditions.
8.7 Within 45 (forty-five) Calendar Days of each anniversary of the Closing
Date, Newco shall provide the Commission, the Unions and the DTIC with
a suitable and appropriately detailed annual report regarding any projects
funded in terms of clauses 5.3 and 5.4 of these Conditions for as long as
these project and/or programmes remain in operation.
8.8 The reports referred to in clause 8.4 to 8.7 above shall be accompanied by
an affidavit attested to by the chief executive officer of Newco confirming
the accuracy of the annual report and full compliance with the Conditions
the accuracy of the annual report and full compliance with the Conditions
or otherwise in the year to which the reports relate.
48
8.9 Newco shall within a reasonable time after request by the Commission, the
DTIC and the Unions respond to any queries that the Commission , the
DTIC and the Unions may have in respect of the abovementioned annual
report and its compliance with the relevant Conditions, including by
providing the Commission , the DTIC and the Unions with all such
information and documentation as may be reasonably required by them.
9. VARIATION
9.1 Should Newco seek to vary the Conditions, it s hall make a proposal to the
Commission, and the DTIC to consent to a waiver, relaxation, modification
and/or substitution of any aspect of the Conditions on good cause.
9.2 For the purpose set out in clause 9.1, "good cause" shall have its normal
meaning as interpreted under the Competition Act and the common law.
9.3 In the event of the Commission, the DTIC and Newco agreeing to the
waiver, relaxation, modification and/or substitution of any aspect of the
Conditions, Newco shall make application, with the support of the
Commission, and DTIC, to the Tribunal for confirmation by it of such waiver,
relaxation, modification or substitution of any one or more of the Conditions.
9.4 In the event of the Commission , and/or DTIC withholding its consent to a
waiver, relaxation, modification and/or substitution of any one or more of
the Conditions, Newco shall be entitled to apply to the Tribunal for an order
waiving, relaxing, modifying and/or substituting any one or more of the
Conditions. The Commission , the DTIC, shall be entitled to oppose such
application.
9.5 The Commission shall be entitled to apply to the Tribunal, on good cause
shown, for the relaxation, modification, or substitution of any aspect of the
Conditions.
49
10. IMPACT OF THE PROPOSED TRANSACTION ON THE PIC’S DIVESTITURE
OF 5.28% IN DISTELL TO ONE OR MO RE B-BBEE-CONTROLLED
ENTITY/IES
10.1 The Merger Parties acknowledge that the Public Investment Corporation
(PIC), on behalf of the GEPF, is under an obligation in terms of existing
merger conditions and order of the Tribunal (Tribunal Case No.
LM215Feb17/VAR037Apr18) to dispose of a 5.28% shareholding in Distell
to a new B-BBEE controlled shareholder (the "PIC Divestiture Conditions").
10.2 The Proposed Transaction is subject to a condition precedent in terms of
the transaction agreements and scheme that all (or the majority) of the
PIC's shareholding in Distell be exchanged for shares to be held by PIC in
Newco. The Merger Parties and Commission acknowledge that the PIC
Divestiture Conditions should be varied to allow the PIC to dispose of its
obligation in Newco pur suant to the implementation of the Proposed
Transaction. This amendment will require a separate variation application
by the PIC and/or the Commission to the Tribunal for its consideration. The
amendment application is to be instituted within 60 (sixty) Calendar Days
of the Closing Date.
10.3 Newco shall not oppose the PIC and Commission’s efforts to amend the
PIC Divestiture Conditions before the Tribunal, such that, inter alia, the PIC
Divestiture Conditions shall apply to the PIC’s shareholding in Newco.
10.4 The Merger Parties shall provide any appropriate assistance to the PIC and
Commission, to ensure that the disposal of PIC's shares in Newco to a new
B-BBEE shareholder is implemented in accordance with applicable
timeframes and the order(s) of the Tribunal . A s is customary in such
transactions, such assistance will include, but is not limited to, the prompt
provision of information regarding Newco (including any due diligence
process) to potential B -BBEE shareholders (subject to an appropriate
confidentiality regime), the waiver of any pre-emption rights, the facilitation
confidentiality regime), the waiver of any pre-emption rights, the facilitation
of any site visits by potential B -BBEE shareholders, the facilitation of
engagement with management by potential B-BBEE shareholders and the
50
passing of any resolutions and the undertaking of a ny corporate actions
necessary for the implementation of this disposal.
11. APPARENT BREACH
11.1 Any person who believes that the Merger Parties have failed to comply with
these Conditions may approach the Commission with a complaint.
11.2 If the Merger Parties appear to have breached the se Conditions or if the
Commission determines that there has been an apparent breach by the
Merger Parties of any of these Conditions, this will be dealt with in terms of
Rule 39 of the Commission Rules read together with Rule 37 of the Tribunal
Rules.
12. GENERAL
All correspondence concerning these Conditions must be submitted to the
following email address: mergerconditions@compcom.co.za and
ministry@thedtic.gov.za.
51
ANNEXURE A - MERGER PARTIES' EXISTING PRODUCTION OPERATIONS
AND PRODUCTIVE CAPACITY
[CONFIDENTIAL]
Capacity
(mHL per annum)
Heineken SA (pre-merger)
brewery
Distell distilleries, cideries
and wineries
Combined
52
ANNEXURE B - PRE-EXISTING PLANNED CORPORATE SOCIAL INVESTMENT
EXPENDITURE OF THE MERGER PARTIES
[CONFIDENTIAL]
Total planned expenditure
Heineken SA (pre-merger)
Distell
Combined
53
ANNEXURE C - MERGER PARTIES' HDP PROCUREMENT EXPENDITURE
[CONFIDENTIAL]
Summary of HDP
Procurement
Total Local
Procurement
(all products
and services,
including Key
Inputs)
HDP Spend
HDP
Procurement
Benchmark
Ratio (clause
4.2.1)
R'bn R'bn
Distell
Heineken
Combined
27.2%
Summary of Local Sourcing
of Key Inputs Procurement
Total
Procurement
of Key Inputs
Local
Sourcing of
Key Inputs
Local
Procurement
Benchmark
Ratio (clause
4.1.1)
R'bn R'bn
Distell
Heineken
Combined
80.3%
Notes
1 - To ensure an accurate alignment of information between the parties, Distell's
information represents a 12 month rolling estimate to June 2022 (per May 2022
data) and Heineken SA's information represents FY2021 i.e. 12 months to
December 2021.
2 - HDP spend is measured against Measurable Spend as defined per third party
verification requirements.
3 - Local sourcing inputs: Raw materials & ingredients: such as malt, grape and
wine, dairy, apple juice concentrate, sugar and sweeteners, compounds &
flavours, maize, hops and barley;
Packaging materials: such as glass, cans, cartons, closures and labels.