Natfoods-Profeeds merger under threat

CONCERNS have been raised over the alleged monopolistic structure of the proposed merger between Zimbabwe’s two stockfeed manufacturing giants, National Foods and Profeeds.

The companies plan to set up a new stockfeed 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 National Foods will take up the balance.

Concerns of an impending monopoly are now threatening the proposed deal at a time when the transaction is awaiting the Competition and Tariff Commission approval.

Information in the market says CTC raised concerns over the transaction and has written to NatfFods management to clarify some competition issues surrounding the transaction.

NatFoods managing director Mike Lashbrook confirmed to The Herald Business this week that there has been communication between the company and the competition authorities in line with the transaction.

“There is nothing uncompetitive about the transaction as it is part of our bigger plan to improve efficiencies in our operations and also ensuring cost effectiveness,” said Mr Lashbrook.

“This transaction will go a long way in improving our cost structure as you are aware that Government has just introduced value added tax on meat products. This is certainly going to have an effect on stock feeds business as well,” he said.

The NatFoods transaction is expected to ensure that the groups use their capacity to the fullest while it will help boost against competition from the impeding recapitalisation of two of its major competitors, Agrifoods and Blue Ribbon Industries.

Under the arrangement, the two stockfeed manufacturing companies will sell their respective stockfeed manufacturing assets and lease their immovable property to the new company for purposes of manufacturing stockfeed. The total transaction value is estimated at $10 million.

According to documents seen by this publication last year, both National Foods and Profeeds will shut down their stockfeed manufacturing units.

In the event that in the future, parties decide to exit the stockfeed business completely, the new company will manufacture as well as wholesale and retail stock feed.

National Foods and Profeeds will also maintain their main line of business other than stock feed, independently of each other. The shareholding, in each of the businesses shall remain the same and shall not be affected by the proposed transaction.