Afgri-senwes to focus on retail
THE management of the joint venture between Afgri Operations and Senwes will now focus their attention on the integration of the retail assets of the two companies.
THE management of the joint venture between Afgri Operations and Senwes will now focus their attention on the integration of the retail assets of the two companies with little or no disruption in service to farmers after their transaction was conditionally approved on Friday.
Afgri Operations CEO Chris Venter said the rationale behind the transaction was to create a platform for growth, with the realisation the growth possibilities were on the retail side. The retail assets of both firms, consisting of 66 stores in Gauteng, Free State, KwaZulu-Natal, North West, Mpumalanga and the Western Cape, would be housed in the joint venture, as well as Afgri’s farming wholesale business.
The Competition Tribunal approved the transaction after requesting a number of changes to the conditions proposed by the parties and the Competition Commission. This included that all permanent, contract and temporary employees be bound to certain terms of the conditions which were aimed at preventing the anticompetitive exchange of information between Afgri and Senwes.
The tribunal, as part of several monitoring conditions, imposed a condition that requires annual reporting to the commission on compliance with the conditions.
The tribunal questioned Mr Venter and Senwes MD Francois Strydom last week on the rationale for the transaction, the anticipated efficiency associated with the deal, the reasons for the limited geographic overlap between the retail stores of Afgri and Senwes, and why the parties could not individually expand their retail footprint.
Mr Venter testified that one of the benefits flowing from the transaction would come from shared head office costs and efficiency with stock handling. He said increased volumes would enable the joint venture to negotiate better prices with suppliers. The stores sell fertiliser, animal feed, seed, fuel and vaccinations to farmers, as well as nonfarming products such as hardware and building materials. The two companies will continue to compete in terms of grain handling and storage, as well as financial and insurance services to farmers.
The commission’s assessment of the transaction raised concerns that the joint venture might be used as a platform for the exchange of sensitive market information relating to the competing divisions. Public interest assessments, in terms of job losses, form part of merger reviews and in this case the commission accepted a proposal that only 50 people at head office level would be retrenched as a result of the transaction. These 50, who will be skilled employees with mid-level operational skills and senior and top management, may only be retrenched a year after the transaction is approved.
The tribunal also ordered there may not be any retrenchment of employees in the retail businesses that will be transferred to the joint venture.
Mr Venter said any new venture posed challenges. “Our challenge for the coming 12 months will be to successfully join the two businesses.”