South Africa’s competition tribunal has prohibited the proposed R403,8-million merger between listed retailer and distributor Massmart and sports retail group Moresport.
Announcing its decision on Monday, the tribunal said it would hand down its reasons for the refusal in due course.
Massmart had planned to acquire an 84,1% controlling stake in the 42-store Moresport group from Nedbank’s private equity division, Vestacor, and Moresport management.
Moresport owns retail chains Sportsman’s Warehouse, Sport Shoe World and Outdoor Warehouse, which Massmart planned to add to its Massdiscounters division containing the Game, Makro and Dion retail chains, which all sell similar sports equipment, clothing and outdoor accessories.
In October the competition commission recommended to the tribunal that the proposed merger be prohibited, saying that the two companies competed in various markets relating to sports and outdoor goods. The markets that raised particular concern were the general sports equipment and outdoor equipment markets.
The commission found that only a limited number of firms operated national chains that compete with the merging parties, with the only significant competitor in the general sports equipment market being identified as Totalsports. The commission, however, found that Totalsports sells a narrow range of sports equipment as compared with Massmart and Moresport.
Regarding outdoor equipment, the commission found that although various retailers specialise in outdoor goods, the majority focuses on apparel and footwear as opposed to equipment. The only significant competitor in the outdoor equipment market was Cape Union Mart.
The commission found that Moresport was an effective competitor to Massmart and that the merger was likely to further concentrate the already concentrated market. In addition, the efficiencies proposed by the parties were unlikely to outweigh the anti-competitive effects of the merger.
The commission accordingly concluded that the merger was likely to substantially prevent or lessen competition in the markets in which the parties compete, and recommended that the competition tribunal prohibit the merger. — I-Net Bridge