Walmart-Massmart merger permitted along with conditions

Walmart Stores can now trade in South Africa, with the Competition Tribunal having approved its merger with Massmart subject to conditions, said the tribunal.

“The Competition Tribunal has at this time approved the merger between Wal-Mart Stores Inc. of the united states (“Walmart”) and South African retailer Massmart Holdings Limited (“Massmart”), subject to conditions,” the tribunal reported.

The final decision comes after hearings recently held on the merger. The hearings came into being at the recommendation of the Competition Commission in February that the merger be authorized without the need of conditions. This subsequent to shareholders voting to accept the US company’s bid to acquire 51 percent of Massmart in a offer worth somewhere around R16.5 billion.

 

As outlined by Walmart, its rationale for entering into the deal can be described as a plan to be in emerging markets, in particular South Africa and the sub-Saharan region.

The Departments of Economic Development, Trade and Industry and Agriculture, Forestry and Fisheries have been opposed to an unconditional approval of the merger, suggesting as an alternative that the merger be approved with conditions in order to safeguard the public interest.

Labour unions, specifically the South African Commercial, Catering and Allied Workers’ Union (Saccawu), the South African Clothing & Textile Workers’ Union (Sactwu), Congress of South African Trade Unions (Cosatu) and other unions in industries that sell products directly into the retail sector intervened in the matter, suggesting the fact that the merger really should have conditions and that if this was not possible, that the merger be blocked.

The tribunal suggested it was common cause that the merger creates absolutely no competition concerns, that Walmart does not compete with Massmart, consisting of stores such as Game, Dion Wired and Makro in its chain.

The commission had at first proposed that the merger go ahead without the need of conditions, however , subsequently altered its position as it obtained evidence at the same time also recommending the reinstatement of more than 500 workers that were retrenched by Massmart.

The merged company is going to be forced to honour already existing agreements with unions for a period of three-years.

Walmart (which operates in numerous countries globally, including Mexico and Japan) stated it was ready to commit to no retrenchments for two years.

 

“This merger will also likely have a number of losers. Walmart’s proposed entry into areas presently underserved by large retailers may possibly displace a number of small businesses and in others, decrease the market share of several major retailers. That is an unavoidable result of the competitive process,” said the tribunal.

“We are, however, mandated by the [Competition] Act not to be indifferent to certain public interest concerns caused by a merger, if they are substantial. The purpose of public interest concerns is not to protect firms from losing out to market forces, but to protect a substantial public interest.”

The tribunal said it would give reasons for the decision on or before 29 June 2011.

Source: BuaNews

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