CTC to block NatFoods merger

28 Jul, 2017 - 20:07 0 Views
CTC to block NatFoods merger

eBusiness Weekly

Tinashe Makichi
Innscor Africa Limited’s plans to merge partial subsidiary companies, National Foods and Profeeds are under threat following recommendations adopted by the Competition and Tariff Commission (CTC) to block the deal.

According to CTC, the merger will create a monopoly in the stock feed industry, which might lead to price fixing considering that the same company also has interests in another stock feed producer, Irvine’s Zimbabwe.

The two companies plan to set up a new stock feed company which will be run as a separate entity. African Feed Mills Private Limited, the new company will be 60 percent owned by Profeeds while NatFoods will take up the balance.

According to NatFoods, the merger will improve its efficiencies and its cost structures. Under the arrangement the two stock  feed manufacturing companies will sell their respective manufacturing assets and lease their immovable property to the new company for purposes of manufacturing stock feed.

The transaction is expected to ensure that the two companies utilise their capacity to the fullest while boosting their muscles against competition from the impeding recapitalisation of two of its major competitors, Agrifoods and Blue Ribbon Industries.

Industry sources say recommendations by the commission’s investigations unit to block the deal on competition grounds means that the authority should brace for another bruising contest with Innscor. The two are already locked in another legal fight over its acquisition of NatFoods, which is yet to be determined by the Supreme Court.

In 2013, CTC slapped Innscor with a $2,5 million penalty over its acquisition of 49,9 percent shareholding in NatFoods which it said was in apparent breach of notification provisions of the Competition Act, Chapter 14:28, stipulating the agency should be notified of such developments within 30 days.

That shareholding was later reduced to 37,82 percent.  The decision was then contested at the High Court with judgment in favour of Innscor but the authority appealed against it at the Supreme Court.

A well-placed source at CTC told the Business Weekly that investigations into the proposed merger were completed and a recommendation to block the deal was made, the merging parties were notified and given a chance to respond.

Natfoods managing director Mike Lashbrook could not be drawn into giving out detail but said discussions are ongoing with regards to the deal.

“At the moment we are still talking with CTC with regards the proposed merger. We really want this merger but my comment is we are still in contact with CTC” said Mr Lashbrook.

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