Sovereign Foods has told the Competition Tribunal that the bid by Country Bird Holdings (CBH) to acquire it was motivated by financial difficulties and that it should set aside the Competition Commission’s approval of the proposed deal.
In its filings to the tribunal, Sovereign said CBH’s difficulties would lead to concern over jobs, which had not been considered by the commission.
It also said that CBH would not implement a meaningful black economic empowerment transaction if it acquired Sovereign and that this would undermine Sovereign’s efforts to secure a competitive advantage in the market.
Sovereign claimed that given the Takeover Regulation Panel’s decision that CBH’s bid had lapsed, there was no merger to consider. There was no trigger and thus no jurisdiction for its exercise of any power under the Competition Act. So "the commission acted without authorisation, and erred in law, in purporting conditionally to approve the proposed takeover".
Sovereign is seeking a review or a reconsideration of the commission’s approval to block further acquisition bids by CBH. Its application includes a detailed account of the twists and turns in a 14-month battle that has seen neither party make meaningful headway.
Anthony Clark of Vunani Securities said on Thursday that the latest move was part of a determined bid by Sovereign management "no matter the cost, no matter the time … to stay independent and keep their jobs and perks".
The legal bills accumulated in the battle had already cost Sovereign shareholders 28c a share, Clark said.
A competition lawyer said the latest move by Sovereign was typical of hostile takeovers. "The competition authorities inevitably become a weapon used by both sides," he said.
Sovereign’s latest move was ironic given that it had approached the tribunal earlier in 2016 to complain about CBH making an offer without notifying the competition authorities. "Now Sovereign is complaining about CBH getting that authority without an offer," said the lawyer.
Sovereign said it had told the commission that the merger would reduce competition and increase foreclosure incentives. Sovereign had also said that because CBH saw the proposed takeover as a means to extricate itself from financial difficulties, it would try to impose its business model on Sovereign, which would significantly reduce the combined employee payroll.
CBH has given the commission undertakings that it would not retrench any employees for the first three years.
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