The Competition Tribunal has approved Shoprite’s acquisition of 46 retail grocery stores from Massmart. These include supermarkets, wholesalers and liquor stores.
It has also given Shoprite the green light to buy Massmart’s Massfresh business. However, the competition authorities’ approval of the deal comes with conditionalities.
In line with the advice of the Competition Commission, the Competition Tribunal instructed that Massmart sell ten retail outlets to independent retailers, especially those from historically disadvantaged backgrounds.
This comes as they deemed those stores problematic due to a combination of reasons, including an over-concentration of established retail players where these stores were located.
And there were other conditions.
Principal Analyst at Competition Commission, Wiri Gumbie says, “In this merger, we had recommended that there should be no employment losses. In fact, we had recommended that the merger approved 7 000 jobs. Then there’s a greater spread of ownership by historically disadvantaged persons and workers in the economy, you will note from the fact that there is going to be an employee share ownership scheme post this transaction in terms of which all of the workers of Shoprite and these target Massmart stores will now own a stake in the merged entity.”
Some market players say Shoprite got the Massmart assets at a bargain basement price. But the conditionalities that have been laid down by the competition authorities will inevitably result in the retailer having to shell out significant sums to be compliant.
Regardless of this, it’s believed that where Massmart fell short in running the enterprises profitably, Shoprite will likely do a better job.
A portfolio manager at Rand Swiss says, “overall, as you say taking 42 new Cambridge stores, taking on two fruit spots, they’re taking over the mass fresh meat business at least, as well as 12 Masscash cash and carry stores. So, I think it’s gonna help Shoprite expand its footprint and because Shoprite is a savvy operator, it looks like a good transaction.”
As part of the deal, Shoprite will be expected to make a substantial investment in skills development and in supporting local small businesses.