Competition watchdog slips up on tile merger

While the competition authorities are on a drive to sniff out anticompetitive behaviour in industries ranging from bricks to meat producers and fire companies, their oversight of company deals appears to have fallen by the wayside – with Italtile’s attempt to buy Ceramic Industries an apparent casualty.

Having first announced its plan to acquire a further 73.5% stake in Ceramic Industries last April, Italtile is still no closer to sealing a deal. The Competition Commission blocked the acquisition, prompting an appeal hearing with the tribunal in October 2016. A full hearing was set for March, but it was delayed to July 10 to give the commission time to prepare.

That delay resulted in the hearing falling outside the extension date that Italtile and Ceramic had stipulated in their original merger talks. This means the extension date has now been pushed to the end of September. Italtile is still hopeful that a final presentation of arguments — set for August 18 — will see the appeal fall in its favour.

The irony is that the two companies were founded and are majority-owned by the same man. Giovanni Ravazzotti established Italtile in 1969 and Ceramic in 1976, the latter in anticipation of sanctions against SA that would interrupt imports of Italtile’s products from Italy.

He listed the two companies in 1992, but took Ceramic private in 2012, when Italtile and his investment vehicle Rallen bought out Ceramic. Ravazzotti is the biggest shareholder in Italtile, with 62.3%.

Italtile says the delay of the acquisition has not affected trading, though in a tough environment that has crimped earnings management’s time may have been better spent than on this protracted process.

Hugh Herman, chairman of Pick n Pay’s remuneration committee wasn’t holding out much hope for the shareholder who asked that more details on performance targets be disclosed.

“Your point is taken and we’ll give consideration to providing details,” was his noncommittal response. Perhaps he felt the committee had done enough for one year. After all, it did not award any short-term bonuses.

In SA, that was a radical step. Deloitte, which has researched the subject, says it puts Pick n Pay with a tiny minority of JSE companies that don’t give guaranteed bonuses.

But, as the shareholder said, without details, it is impossible to judge executive performance. This means it is down to the remuneration committee, which may be a little too chummy. Given the 50-year-old retailer has just performed its deepest job culling yet, it was just as well the executive bonuses were not paid, though they’re still in line for long-term incentives.

That about 10% of jobs were cut without any hostilities suggests the voluntary severance package was reasonably attractive. The cuts also suggest Pick n Pay’s relationship with the union is being transformed, though one that will not benefit the union. Despite offering generally better employment terms, Pick n Pay has often been on the wrong side of the union. It’s likely most of the job cuts were long-serving unionised staff who will be replaced by more flexible, nonunionised workers.

But perhaps chairman Gareth Ackerman put it in context: these are tough times in SA, but we’ve seen worse and come through stronger.

Neels Blom edits Company Comment (blomn@bdlive.co.za)