Megabrew merger approved by Tribunal subject to conditions

The conditions imposed by the Tribunal, which are designed to remedy competition and public interest concerns arising from the merger between the world’s largest brewers, are largely similar to those that were proposed by the Competition Commission, and are the result of extensive consultation with the Minister of Economic Development.

One of the most notable differences between the conditions imposed by the Tribunal and those proposed by the Commission relates to employment. Whereas the Commission sought an evergreen ban on merger-related retrenchments, the Tribunal relaxed this condition somewhat by replacing the outright ban with a five year ban on merger-related retrenchments, after which the onus will be on a retrenched employee to show that their retrenchment was merger-related, rather than operational.

The condition relating to the provision of fridge space was also tweaked so that tavern owners and retailers who are supplied with fridges by the merged entity will be free to allocate 10% of the fridge space to cider products of South African rivals for a period of five years. This is over and above the perpetual obligation on the merged entity to allow the allocation of 10% of the space in fridges and coolers supplied by it for the products of smaller rivals with sales of less than 200,000 hectolitres per year.

The merger conditions also detail how the R1 billion AB Inbev investment fund will be allocated, with amounts of R610 million, R200 million and R190 million being earmarked for agricultural development, enterprise development and social development (including clean energy initiatives), respectively. The fund will be managed by an implementation board consisting of an equal number of AB Inbev and government appointees.

The Tribunal’s conditional approval of the merger means that the transaction has now been approved by competition authorities in 17 jurisdictions, including the European Commission, Australia, India, Botswana, Kenya and Namibia. Approval by the United States and Chinese competition authorities remains outstanding.

The vast swathe of conditions imposed will provide ongoing compliance headaches for the merged entity. It remains to be seen to what extent some of the conditions (especially those dealing with local procurement and maintenance of headcount) will become standard policy, or if they will be largely reserved for “megamergers” involving foreign takeovers of large South African assets.