Despite receiving a number of objections from the industry to the proposed acquisition of products by The Coca-Cola Company (TCCC) from Appletiser South Africa (Pty) Ltd, the Competition Commission has approved the intermediate transaction without conditions.
Announcing the approval on Thursday, the Commission said its investigation addressed concerns relating to a possible increase in concentration levels, coordinated conduct, leveraging of existing power in the carbonated soft drinks market to marginalise competitors in the relevant markets and other anti- competitive practices.
Mergers and acquisitions division manager Nkonzo Hlatshwayo said: “The Commission was, in the end, satisfied that these concerns were unfounded and that despite TCCC gaining market share, the acquisition by TCCC of Just Juice and Valpré bottled water would not lead to a substantial lessening or prevention of competition.”
He said the transaction did not raise significant public interest concerns.
The transaction constituted a merger in terms of section 12(1) of the Competition Act of 1998, as amended (Competition Act No. 89 of 1998) in that it related to a direct acquisition of part of the business of another firm, and is constituted through the purchase of assets.
Hlatshwayo said the transaction encompassed the purchase by TCCC of the Just Juice trademarks, intellectual property rights and formulae from SABMiller Finance B.V. and the Valpré trademarks, intellectual property rights and formulae from Appletiser South Africa (Proprietary) Limited (ASA).
As part of the transaction, Waveside, a subsidiary of TCCC would acquire the entire issued share capital of Valaqua from ASA.
ASA is a company registered in the Republic of South Africa, while SABMiller is a company registered in The Netherlands.
From a portfolio perspective, he said that TCCC could benefit from economies of scope in distribution, giving it a competitive advantage over rivals in the distribution of both Valpré and Just Juice since Coca Cola is the dominant firm in the carbonated soft drink market with a well-developed distribution system.
“There is, however, no evidence to suggest that size alone conveys any significant competitive advantage that is not efficiency related. Indeed, often the efficiency effect can lead to lower distribution costs which can provide scope for lower prices being passed down to the consumer. In this case, however, the distribution and sale will continue as before the transaction,” Hlatshwayo concluded. – I-Net Bridge