Jet acquisition approved conditionally
The Compe t i t i on and Consumer Authori ty ha s approved, wi th conditions, the acquisition of parts of the Jet business, consisting of certain assets and identified liabilities.
Taking the public interest concerns and pursuant to the provision of section 53 of the Act, the Authority has approved the proposed acquisition is conducted by Edcon Limited, through Jet Supermarkets Botswana ( Pty) Ltd in Botswana as a going concern, by the Foschini Group Limited acting through Foschini ( Botswana) [ Pty] Ltd, subject to the conditions that “There shall be no merger specific retrenchments or redundancies that may affect the employees of the merged enterprises,” said the Authority which is led by Tebelelo Pule.
The transaction was notified to the Authority on 2nd October 2020 and the merger assessment was completed on 10th November 2020. TFG is a chain store group in Southern Africa and has diverse fashion retail brands in Botswana, offering clothing, jewellery, cell phones, accessories, cosmetics, sporting apparel and equipment, homeware and furniture, from value to upper market segments in larger urban centres across Botswana. Edcon’s trading names are: Edgars; Jet; Thank
U; and Credit and Financial Services. The Jet Business is Edcon’s discount department store division, selling clothing, footwear, homeware and some cosmetics as well as cellular products and targets lowerto- middle income consumers throughout Botswana.
In terms of the relevant market, the assessment of the proposed transaction revealed that from a
general perspective, the merging parties may be regarded as competitors as they are seen to be active in similar segments of market. “However, a more refined analysis has shown that the markets of the merging parties in Botswana are differentiated to accommodate the diverse tastes, preferences, and income levels of Batswana. For this reason and in a narrower perspective, TFG is not regarded as the closest competitor to the Jet Division,” said the Competition Authority in a statement this week.
“Therefore, for purposes of analysing the proposed transaction, and in view of the nature of the products and services offered by the merging parties, precisely the target entity, the Authority determined the relevant product market( s) to be the market for the Sale of Apparel, Cosmetics, Homeware and Cellular products. The geographical market is national.”
In the assessment of Substantial Lessening of Competition, the Authority discovered that TFG is classified as a standard retailer which targets middle- toupper income consumers and it competes with stores such as: Truworths and Woolworths. On the other hand, the target, Jet Division, is regarded as a discount/ value retailer targeting lower income consumers or a mass market, as is the case for, Ackermans, Pepkor, Cash Bazaar, and to a lesser degree, Mr Price. Therefore, a narrower view of the market is that TFG through its stores trading in Botswana is not a close competitor to the Jet Division. Additionally, there exist other major rivals who will continue to exercise competitive constraints on the merging enterprises post- merger.
“In terms of the Acquisition of Dominant Position, the analysis shows that the acquisition of the target business by Foschini Botswana will result in an insignificant combined market share in the relevant market. Therefore, the Authority does not foresee acquisition of a dominant position in the market under consideration or any other market on account of the proposed transaction,” said a statement.
“With regards to Public Interest Considerations, the findings of the assessment revealed that the transaction is as a result of the need for a Business Rescue by the target enterprise; and that, in the event that the proposed transaction fails, it will translate into the loss of the employment positions at the target business. On that note, the Authority found it necessary to ensure that the proposed merger does not result in any retrenchments or redundancies. In that regard, the assessment indicated that there exists a need to protect the employees of the merged entity from the possible merger specific retrenchments/ redundancies.”
The Authority determined through the analysis of the facts of the merger, that the proposed transaction is not likely to result in the prevention or substantial lessening of competition, or endanger the continuity of the services offered in the relevant market. However, it is noted that the proposed transaction gives rise to public interest concerns under section 52( 2)( e) of the Act, whereby possible retrenchments/ redundancies may arise as a result of implementation of the proposed merger.