Afrimat is a step closer to laying its hands on Lafarge SA in a deal worth nearly R1bn after the Competition Commission approved the merger on condition that it will not result in job losses and the merged entity will divest its interest in general aggregates quarries and ready-mix concrete plants across the country.
The competition watchdog on Monday said it will recommend approval to the Competition Tribunal, which has a final say on any mergers.
“To address public interest concerns, the commission has recommended that the merger be approved subject to a moratorium on merger-related retrenchments and other measures to protect employment. The parties have agreed to these conditions,
“The commission further found that the proposed transaction does not raise any other substantial public interest concerns.”
The commission found that the merger raised competition issues as it had horizontal overlaps as regards general aggregates and ready-mix concrete. It said the merger is likely to result in a substantial lessening of competition in the general aggregates and ready-mix concrete sectors and recommended that the merged entity sell its interest in that space.
“To restore the lost competition that would otherwise arise from the merger and in order to ensure that the merger is justifiable on public interest grounds, the commission has recommended that the tribunal approve the merger subject to the merging parties divesting of various general aggregates quarries and ready-mix concrete plants across SA ... the merging parties have agreed to these recommendations.”
The merger, touted by analysts as a “deal of the century” by Afrimat, was first announced in June. It will see Afrimat buying 100% of Lafarge SA and its subsidiaries, collectively known as the LSA Group, which is owned by a subsidiary of Swiss-French multinational building materials manufacturer Holcim Group.
Afrimat, valued at R8.4bn on the JSE, will pay R900m for the assets. The company’s CEO Andries van Heerden has said the transaction will give it access to some of the best assets in the SA construction industry amid a lift in demand, at a discounted price.
Trade, industry and competition minister Ebrahim Patel in September hailed the public interest conditions the commission attaches to mergers, saying this saved 236,000 jobs over the past five years.
The commission will next week lock horns with Coca-Cola Beverages Africa (CCBA) at the Constitutional Court, accusing the company of conjuring up a plan to get rid of workers after a 2016 merger, contravening one of the key conditions set by the authorities in allowing the deal to go through.
The merger created the continent’s largest bottling company.
In an affidavit filed with the apex court and seen by Business Day, the Competition Commission says Coca-Cola’s domestic unit breached merger conditions by retrenching 368 employees in 2019.
One of the key conditions for the deal getting the nod was that the merged entity will freeze layoffs for three years.
After the 2019 retrenchments, the commission issued CCBA with a breach notice, opening the door for a possible revocation of the merger approval, administrative penalties or even an order to disinvest.
The Larfarge deal comes as Afrimat says it is seeing an uptick in activity, with embattled Transnet also coming to the party as it battles to fix its rail network.
The company last week said Transnet has been buying a lot of ballast — the stones used under rail tracks.
Transnet maintains an indispensable rail network of about 31,000 track kilometres over which commodities are railed.
The state-owned company has over the years fallen behind on maintenance as it grapples with a cash crunch and operational inefficiencies.
With Michelle Gumede
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