South Africa’s competition regulator is seeking to revoke Premier Group’s acquisition of RFG Holdings amid plans to close a factory.
Premier’s takeover of fellow South African food and drinks producer RFG was agreed in October last year. The country’s Competition Tribunal cleared the merger on 6 March, subject to conditions that included employment protections, with the deal then closing at the end of that month.
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However, South Africa’s Competition Commission (CompCom) has this week applied to have the Tribunal’s conditional approval of the merger withdrawn because of plans by Premier to close the Western Cape fruit canning facility in Tulbagh, the Fruit Processing Western Cape (FPWC) business.
Before and during the deal’s approval process, Premier and RFG had said they did not plan to close or dispose of any manufacturing sites, production lines, or equipment after completion, according to a statement from CompCom.
In its statement yesterday (7 October), the Commission said Premier notified it in July about plans to close the RFG plant in Tulbagh, putting more than 400 jobs at risk, along with those of “thousands” of seasonal workers.
It said it launched an investigation after receiving a complaint from the South African Clothing and Textile Workers Union, among others, as the plant closure would breach the merger approval conditions.
The watchdog said its investigation found the companies had considered and discussed the Tulbagh closure before the deal’s approval but had not revealed that information.
The regulator highlighted the information was “material” to its assessment and that the closure would create a “monopoly” by removing fruit company Langeberg’s only rival in South Africa’s canned-fruit market.
In a trading September issued in September, Premier said it was in talks with Langeberg Foods, described as “the only other deciduous-fruit cannery in South Africa”, with respect to the “potential transfer of a significant portion of FPWC’s fruit-supply contracts”.
Responding to CompCom’s statement, Premier said it “strongly disagrees” with the Commission’s account.
It said the decision to shut the canning facility “followed a significant deterioration in FPWC’s operating environment and the commercial realities facing the canned deciduous fruit category” such as “weakening” global demand and higher input costs.
The company outlined the decision was made only after completion of the transaction and was “unrelated” to the merger.
Premier added it has “proactively engaged” with the regulator since July and supplied supporting documentation.
It also said 407 of the 409 affected employees accepted voluntary severance agreements, while two will remain employed by the group.
“As a result, no retrenchments will be implemented.”
For its part, CompCom wants the deal to be refiled, or to impose revised conditions. It has also requested urgent interim relief to preserve FPWC’s ability to operate as a cannery.
Premier intends to oppose the application.
The group reported its annual results in July for the period to 31 July.
Premier said revenue increased 6.6% to R21.2bn ($1.2bn), while EBITDA rose 18.2% to R2.8bn. Operating profit was up 23.2% at R2.4bn.
Earnings per share climbed 27.4% to 1,192 South African cents, while the headline measure increased 27.7% to 1,204 cents.
