Competition Commission recommends conditional approval of SABMiller Plc, Gutsche Family Investments (Pty) Ltd and The Coca Cola Company merger

The Competition Commission has recommended that the Competition Tribunal conditionally approves of the merger between SABMiller Plc, Gutsche Family Investments (Pty) Ltd and The Coca Cola Company. The merging parties plan to combine the bottling operations of their non-alcoholic beverages into one entity to be known as Coca-Cola Beverages South Africa (Pty) Ltd (‘CCBSA’), which will result in SABMiller transferring its Appletiser, Grapetiser, Fruitiser, Peartiser and Lecol brands to The Coca Cola Company.

The Commission’s investigation showed that the large merger would most likely lead to a number of competition and public interest concerns which would need to be properly addressed before any merger is to take place. Because the different bottling companies would fall under one entity, it is likely that the newly-formed entity would gain significant bargaining power over its suppliers. In order to make sure that the suppliers are not put in a weaker position to negotiate sustainable prices post-merger, the merging parties have agreed to purchase all tin cans, glass, plastic bottles, packaging, crates and sugar from local suppliers, subject to certain terms and conditions.

Unfortunately, a maximum of 250 employees may lose their jobs as a result of the merger. The parties have therefore undertaken to provide funding to re-skill affected employees, counselling and guidance on applying for alternative employment, and re-employment of some of the affected employees within the business of CCBSA.  The parties have also agreed to invest R500 million to develop the downstream distribution and retail aspects of CCBSA and to increase its B-BBEE ownership.

The Commission has emphasized that this proposed merger must not negatively affect businesses in the value chain that previously benefited from the existence of the individual bottlers in South Africa and that all competition and public interest concerns must be identified and addressed before any merger is to take place.