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Feared spillover effect on SA milk giant takeover Clover

Publishing Date : 05 August, 2019

Author : TSAONE SEGAETSHO

Local antitrust body Competition Authority had a big decision to make this week following approval of a huge takeover of Clover Botswana by South African giant diary producer Milco SA.


This week Competition Authority gave Milco SA thumbs up for the proposed acquisition of 100 percent shareholding in Clover Industries, a development which will see the South African entity owning Clover Botswana. But this decision did not come without a headache for the local antitrust body which moved to give Milco SA strict conditions for the takeover. This is because, according to Competition Authority, this merger might come with underlying economic effects that can affect the local diary industry or local business operations of Clover Botswana. According to Competition Authority this merger gives rise to public interest concerns, resulting in a fear of infringement of the Competition Act.


“It is noted that the proposed acquisition gives rise to public interest concerns under section 59(2)(b) of the Competition Act in that there may be spillover effects on the Botswana market as a result of subsequent changes emanating from the proposed merger,” said Competition Authority on its approval notice this week.


This spillover effects may mean the South African economic effects may rub into the local economy. This suggests that whatever economic decision taken by the acquiring enterprise will resultantly rub into the local diary industry or Clover Botswana which is the targeted entity in this case. Therefore the merger will not come without conditions according to Competition Authority.


Competition Authority, in pursuant to the provisions of section 60 of the Competition Act of Botswana approved the proposed acquisition with conditions that there shall be no retrenchment of any employee as a result of the proposed merger. During the public hearing of the proposed merger in June this year both the two companies, Milco and Clover, promised that the proposed transaction will also have no adverse impact on the public as there will be no retrenchments.


“The merged entity shall use all its powers to ensure that the business of Clover Botswana is maintained in Botswana to retain business continuity with the local based dairy input suppliers,” said Competition Authority. According to the anti-trust body, in the event that the merged entity is compelled to change the Botswana business model, such intentions should be communicated to the Competition Authority with a clear justification for the decision.


During the public hearing of the proposed acquisition of Clover by Milco which was held in June this year, Competition Authority CEO Tebelelo Pule said Clover should always have the growth of the local Small, Medium and Micro Enterprises (SMMEs) in mind in any decision they make.


For his part, Clover Botswana Managing Director Mike Joyner stated the transaction has the possibility to bring capital investment that can help diversify local economy. “It is going to allow us to play a bigger role is diversifying local economy through job creation that contributes to the wellbeing of the economy,” he said.


“If we look at the developed nations, the SMMEs play very critical roles in sustaining their economies. I always will look at the dominant players in the any industry of any sector and say if at all you want to survive, help grow the SMMEs as much as you can as they can help you survive when they ships are down,” said Pule. Milco representative in the public hearing Kristy Van Der Bergh promised that the merger will come with positive impacts to Botswana as it has possibilities of promoting technical and economic progress locally.


“We want to bring additional funding and expertise as well as help upgrade skills of the already employed personnel.  We also intend to introduce new products that will result in expansion and growth of the dairy sector in Botswana,” she told the audience who were listening to the development of a big merger which would have possibilities of changing the local diary industry.


During the same June public hearing, the targeted party Clover, represented by Clover Botswana managing Mike Joyner could only laud the transaction as “coming with possibility to bring capital investment that can help diversify local economy.” According to Joyner the transaction is going to allow Clover to play a bigger role in diversifying local economy through job creation that contributes to the wellbeing of the economy.


Milco SA, is a special purpose vehicle (SPV) registered in the South Africa company laws jurisdiction and it is controlled by Milco Mauritius International Ltd (“MMI”) another SPV incorporated in Mauritius. According to Competition Authority the two SPVs were formed for the purposes of the proposed transaction between Milco SA and Clover Industries. Milco’s subsidiaries serve over 160 million consumers worldwide and it has presence in more than 70 countries including Turkey and Romania.


Milco Mauritius is owned by International Beer Breweries Ltd(“IBBL”) a company registered in the Middle East, Israel. IBBL is the manufacturer and marketer of beer brands Carlsberg, Tuborg, Holsten and Stella Artois as well as non-alcoholic beer brand Malty and juice brands Prigat and Ocean Spray. Before the approval of the merger the directors of Milco SA were Aran Ernest Oelsner; Joav Asher Nachson (both Israelis) and Andrew Stuart McLeod (South Africans).


Clover Industries or Clover which is the target enterprise is registered in South African. The Johannesburg Stock Exchange (JSE) listed Clover is a branded consumer goods company in the food and beverage industry that is focused on the supply of dairy products, soy products, olive oil, and olives, and the supply of non-alcoholic beverages as well as sales, merchandising and distribution of consumer goods. Before being taken over by Milco, Clover is not controlled by any single shareholder or a group of shareholders.


Clover’s shareholding composition included Clover Milk Producers Trust which owned 12.42 percent while Allen Gray had 7.87 percent. Government Employees Pension Fund garnered 6.04 percent while Lekto Brosseau 5.79 percent and JH Vorster held 4.50 percent. Before the proposed merger which has just been approved by the local antitrust body HSBC held 4.09  percent.


Clover wholly owns Clover Botswana which is based in Botswana and it was the reason for Competition Authority involvement in Clover and Milco merge. Before this huge takeover, directors of Clover were JW Basson, SF Booysen, WI Buchner, NV Mokhesi, JFM Morgan, B Ngonyama, FFF Scheepers, NA Smith, and JH Vorster. All these directors are South Africans.

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