Pan-African boutique competition law firm Primerio has cautioned SA companies entering into M&As to put realistic timelines on the table to conclude the deals as competition authorities take longer to approve or decline deals.
Stephany Torres, an associate at Primerio, reflected on the recently failed merger between Sun International and Peermont as an example of the competition stumbling blocks for getting a deal over the line.
“The collapse of this transaction reflects a wider challenge facing deals in regulated sectors such as gaming, telecommunications and financial services. Where merger control approval is needed, the process can significantly affect whether parties meet their agreed deadlines. The risk is especially high when funding is conditional or when market conditions shift while parties wait,” Torres said.
“Businesses planning large mergers should include realistic timelines in their transaction documents. It is vital to anticipate potential regulatory delays and leave enough time to satisfy conditions precedent. Early and careful engagement with competition authorities helps reduce the risk of late procedural surprises,” she said.
Torres added that in some cases parties may agree to extend long stop dates or consider interim arrangements if the deal structure allows.
JSE-listed Sun International last week walked away from the R7.3bn deal to buy Peermont, which would have given it ownership of the latter’s eight casinos in SA, citing regulatory timelines as the reason the proposed transaction has been terminated.
The Competition Commission had already recommended to the Competition Tribunal to block the deal, arguing that Sun International’s mooted deal to buy Peermont would in essence put more than 90% of the casino market in the hands of only two companies, Sun International and Tsogo Sun.
Opposed
Tsogo Sun opposed the Sun International and Peermont merger.
The Competition Tribunal set its meeting date for its hearing and closing arguments for October 2, which is in conflict with the transaction’s regulatory long stop date, which is September 15.
The long stop date is a contractual deadline by which all conditions precedent to the completion of the transaction must be fulfilled or renounced.
Sun International was not keen for the matter to be drawn out, unlike Vodacom and Masiv which kept extending the long stop date of their R13bn merger, with the parties finally getting a breakthrough on Tuesday. The mooted Vodacom and Masiv merger dates back to 2021 when the deal was first announced.
Sun International’s share price has rallied nearly 10% after it abandoned the deal that would have seen it incur debt.
It was Sun International’s second attempt to acquire Peermont’s gaming business, which includes the jewel in the Peermont Group — Emperors Palace — with the first approach dating back 2015.
Johann Rupert’s Remgro has decried how long it takes to approve deals in SA, saying this is adding to the friction costs of transactions.
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