The decision by the Competition Tribunal on whether to give the Heineken Distell R40.1bn merger the go-ahead is expected this week with the regulatory body saying they have until Wednesday to make the ruling within the required legal time frames.
Business Day understands there has been some frustration among those involved at how long the regulatory process has taken.
The deal was announced in November 2021 with Heineken offering R180 for Distell shares in two parts of the business. The talks about the deal were announced almost two years ago, in May 2021.
If given the go-ahead, the deal will create a brewing giant better able to compete with SAB, part of world’s largest brewer, Ab InBev.
Large mergers need regulatory approval from the tribunal, part of the department of trade & industry. It must ensure the merging parties address competition concerns about monopolies as well as promote worker ownership and broad-based BEE.
The Competition Commission gave its nod for the deal on September 9 subject to conditions. The two businesses waited to January 18 for the tribunal hearings to start. They were completed on January 24.
The tribunal’s decision has to be made in 20 business days after a hearing in terms of the Competition Act, but further legal submissions were made in writing. The tribunal said it received outstanding submissions on February 22, and has 10 business days until March 8 to issue an order within the statutory time frames.
Too low
Chief investment officer at All Weather Capital Shane Watkins said shareholders have lost out as the price for the company is too low, and due to the time the deal has taken the amount offered has dropped in value.
“The original offer was far too low, and because of the time value of money, what shareholders eventually receive, will be even less in real money terms.”
He said the price should be increased, as R180 offered in November 2021 is worth less now.
The deal has taken a long time to execute, and because there is no provision to adjust the price because of a lengthy passage of time, minority shareholders are doubly disadvantaged, Watkins said.
Heineken would not be drawn on whether the commission and tribunal decisions have taken too long, saying “we are very excited to bring together three strong businesses to create a regional beverage champion”.
A Distell spokesperson admitted the tribunal decision has taken longer than expected, but believes a ruling will come any day.
“While the final SA regulatory approval is taking longer than anticipated, Distell respects the process and trusts that a ruling is imminent, which will give all parties greater certainty.”
Value-destructive
Watkins warned the slow regulatory process makes SA less attractive to invest in.
“It is evident that the Competition Tribunal is a hugely value-destructive entity that instead of serving its purpose of preventing anticompetitive behaviour, now [enacts] policies that have nothing to do with competition or anticompetitive behaviour.”
In terms of the amendments to Competition Act, the commission and tribunal must ensure mergers meet public interest conditions such as promoting historically disadvantaged individuals’ and workers’ ownership.
Watkins added regulatory challenges “simply scare off foreign investors [who] want to invest in SA and create growth and jobs”.
Speaking at a recent competition seminar, and not specifically about the Heineken merger, tribunal member and economics professor Liberty Mncube said the tribunal has “generally performed well in terms of mergers being sat down and decided within the timelines”.
But speaking to a legal audience, Mncube admitted that lawyers sometimes say that “the tribunal takes too long”.
Because Heineken is buying the two biggest cider brands locally, Savanna and Hunter’s Dry, Heineken offered to sell its Strongbow cider brand in SA, Lesotho, Botswana, Namibia and Eswatini to ensure it does not own all three ciders.
The competition commission said the sale has to be conducted “in a manner that promotes transformation”.
During the tribunal hearings, SAB intervened and said it was unhappy that Heineken would sell Strongbow and that it wanted Distell to sell Hunters instead — and was interested in it.
SAB was also unhappy with the proposed Devil’s Peak brewery BEE consortium buyer for the local Strongbow licence.
Heineken testified if it was forced to sell Hunters, the deal would be off, with its advocate arguing SAB was being opportunistic
The tribunal said in response to a Business Day query it is “considering the matter after further submissions after the oral hearing, and it’s still within the statutory time frame to issue its order, and will do so in due course”.
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