Afrique Pet Food (Pty) Ltd ("Afrique") v The Dry Pet Food Business of PhilAfrica Foods (Pty) Ltd (LM177Dec20) [2021] ZACT 17 (24 March 2021)

COMPETITION TRIBUNAL OF SOUTH AFRICA

Case No.: LM177Dec20

Afrique Pet Food (Pty) Ltd (“Afrique”) Primary Acquiring Firms

And

The Dry Pet Food Business of Philafrica Foods (Pty) Primary Target Firms

Ltd

Panel: E Daniels (Presiding Member)

H Cheadle (Tribunal Panel Member)

Y Carrim (Tribunal Panel Member)

Heard on: 24 March 2021

Order Issued on: 24 March 2021

Reasons Issued on: 24 March 2021

ORDER

Further to the recommendation of the Competition Commission in terms of section 14A(1)(b) of the Competition Act, 1998 ("the Act") the Competition Tribunal orders that—

I. the merger between the abovementioned parties be approved in terms of section 16(2)(a) of the Act; and

2. a Merger Clearance Certificate be issued in terms of Competition Tribunal Rule 35(5)(a).

24 March 2021

Presiding Member Date

Mr Enver Daniels

Concurring: Ms Yasmin Carrim and Mr Hatton Cheadle

COMPETITION TRIBUNAL OF SOUTH AFRICA

Case no: LM177Dec20

Afrique Pet Food (Pty) Ltd (Primary Acquiring Firm) and

The Dry Pet Food Business of Philafrica Foods (Pty) Ltd (Primary Target Firm)

REASONS FOR DECISION

[1] On 24 March 2021 , the Competition Tribunal unconditionally approved the large merger between Afrique Pet Food (Pty) Ltd ("Afrique") and the Dry Pet Food Business of Philafrica Foods (Pty) Ltd ("Philafrica Target Business").

[2] The transaction involves Afrique acquiring control of Philafrica Target Business. l This is the first part of a divisible transaction. The second part involves Afrique acquiring control of part of the dry pet food business of Martin and Martin (Pty) Ltd [1]

[3] Afrique is a newly incorporated company, and it does not control any firms. [2]

[4] Philafrica Target Business currently manufactures and sells dry dog food under its brand JOCK and co-manufactures dry pet food for other brand owners. [3]

[5] The Competition Commission identified no horizontal or vertical overlaps in the activities of the merger parties. Therefore, the transaction will not result in any market share accretion or changes to the market.

[6] which has an agreement with Philafrica in terms of which Philafrica co-manufactures and packages certain ofs pet food brands, expressed a concern that this agreement will be terminated early as a result of the transaction and thus, negatively impact business. However, the Commission found that the merged entity has no ability or incentive to terminate the existing agreement and as a result, will not foreclose We find no reason to disagree with the Commission's findings.

[7] We conclude that the proposed transaction does not substantially prevent or lessen competition in any relevant market.

[8] In relation to public interest considerations, the Minister of Trade, Industry and Competition (DTIC) required that the employees of the Philafrica Target Business being transferred to the merged entity, do so on conditions no less favourable than their current employment. The merger parties confirmed that the employees of the Philafrica Target business will transfer to Afrique on either (i) new terms and conditions mutually agreed upon with the merged entity; or (ii) if no mutual agreement can be reached, will transfer as per section 197 of the Labour Relations Act of 1995.

[9] Further, the merger parties also made an unequivocal undertaking that there shall be no retrenchments as a result of this transaction.

[10] We also note that the transaction will not have a negative effect on the level of Broad-Based Black Economic Empowerment or worker ownership in the merged entity.

Mr Enver Daniels

Date

Ms Yasmin Carrim and Mr Halton Cheadle concurring.

Tribunal Case Manager: D Mogapi

For the Merging Parties: D Rudman and A Liebenberg of Webber Wentzel

For the Commission: W Gumbi and N Myoli

[1] The Tribunal simultaneously approved the second part of the transaction under CT case number: LM171Dec20 on 24 March 2021.

[1] The Tribunal simultaneously approved the second part of the transaction under CT case number:

LM171Dec20 on 24 March 2021.

[2] Afrique is currently a wholly owned subsidiary of Philafrica, which is in turn controlled by AFGRI Group Holdings (Pty) Ltd, an entity ultimately controlled the implementation of the proposed transaction, QSA Holdings Limited ("QSA") will acquire 50% of the ordinary issued share capital of Afrique, such that Afrique will be jointly controlled by Philafrica and QSA.

[3] Such as Nutribyte, SA Complete Pet Food and PnP (in respect of its Nutriphase brand).