‘Natfoods, Profeeds merger bad for competition’

The Competition and Tariff Commission says it did not approve conglomerate Innscor Africa’s proposal to merge a division of National Foods and Profeeds because the transaction would lessen competition or create a monopoly.

National Foods, which is listed on the Zimbabwe Stock Exchange (ZSE), is a 37 percent owned associate of fellow ZSE listed conglomerate, Innscor Africa, while Profeeds is also an associate of Innscor, which owns 49 percent of the firm.

According to CTC, National Foods is one of the largest manufacturers and marketers of food stuffs in the country while Profeeds is also a leading manufacturer and distributor of stock feeds in Zimbabwe.

The transaction was part of eight mergers and acquisitions CTC either assessed or approved in the first half of 2018, including Tanzanian milling giant Bakhresa’s acquisition of a 100 percent stake in grain miller and feed stock producer Blue Ribbon.

“The transaction involved the amalgamation of the stock feed manufacturing business of National Foods Limited and Profeeds (Pvt) Limited.

“National Foods Limited is a diversified Zimbabwe Stock Exchange listed conglomerate, which is one of the largest manufacturers and marketers of food stuffs and stock feeds in Zimbabwe.

“Profeeds (Private) Limited is a company incorporated in Zimbabwe and its main business is the manufacturing and selling of stock feeds,” CTC said.

If the case goes the same way as an earlier one, in which Innscor Africa was fined $2,5 million for acquiring 49,9 percent in National Foods without notifying the commission, a fresh legal battle could ensure.

The two are already locked in legal fight over the NatFoods transaction, with Innscor contesting the penalty meted on it by the commission, but the case is reportedly yet to be determined by the Supreme Court.

In 2013, CTC slapped Innscor Africa with a $2,5 million penalty over its acquisition of 49,9 percent shareholding in NatFoods, which the commission said was in breach of notification provisions of the Competition Act, which stipulated that the regulator should be notified of such developments within 30 days.

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

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.

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

The transaction is expected to ensure the two firms utilise their capacity to the fullest while boosting their strengths against competition from the impeding recapitalisation of two of the major competitors, Agrifoods and Blue Ribbon Industries.–ebusineswweklyc,ozw

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