Minority shareholders of Takatso Aviation, which got the regulatory nod to acquire a 51% stake in SAA, say they have not agreed to divest from the consortium, as per the Competition Commission’s conditions for the Competition Tribunal to approve the deal.
Takatso is majority owned by Harith General Partners, and the minority shareholders are Global Aviation Operations and Syranix.
Global Aviation leases aircraft and owns and operates domestic passenger airline Lift. Syranix co-owns the Lift trademark but does not hold a domestic passenger airline operator’s licence.
Gidon Novick, who represents the minority shareholders and is a founder of Lift, told Business Times on Friday they would remain in the consortium but without board representation.
“We have not agreed to divest from Takatso/SAA and remain open to finding a way to share the deep local skills and experience we have to build a sustainable regional and international airline and an iconic South African brand,” he said.
Minority shareholders were approached by the department of public enterprises to acquire SAA early in 2021 when Lift was already operating. It then partnered with Harith to form Takatso and was responsible for industry expertise while Harith was to supply funding,” says Novick.
Takatso was announced as the government’s preferred strategic equity partner in June 2021.
“If our skills are no longer required, we will remain as minority shareholders without board representation and with no access to any competitively sensitive information.”
This flies in the face of an announcement by the commission that because the merger was likely to result in a substantial lessening and prevention of competition in the domestic passenger airline market, and because the owners will have access to competitively sensitive information, the parties had agreed to a divestiture condition through which Global Aviation and Syranix would completely divest from Takatso before the merger's implementation.
Novick resigned from Takatso’s board in November, accusing the majority shareholder of keeping the minority shareholders in the dark about funding for the new airline
The commission said: “This concern is further worsened by the fact that the domestic passenger airline market is highly concentrated, barriers to entry are high and are amendable to co-ordinated effects.”
Novick resigned from Takatso’s board in November, accusing the majority shareholder of keeping the minority shareholders in the dark about funding for the new airline.
He said Lift’s focus was on the domestic trunk routes, not regional or international, where SAA mainly operates.
“It is common industry practice for airlines to co-operate in several ways, an example being SAA and Airlink’s previous long-term partnership,” he said.
Another condition is a moratorium on merger-related retrenchments for five years.
Takatso Aviation spokesperson Thulasizwe Simelane said the minority shareholders — Global Aviation and Syranix — were made aware that the divestment condition was under consideration by the commission.
He said Takatso had provided all the relevant information to date, including proposing mitigation strategies to alleviate confidentiality concerns. Similar mitigation strategies have been accepted by the Competition Commission in relation to other transactions concluded previously. The commission did not accept the proposals, he said.
The commission said the divestiture and employment conditions were initially rejected by the parties, resulting in a decision to recommend a prohibition of the merger.
It was only after the merging parties had agreed to the imposition of the remedial conditions proposed by the commission, which include divestiture conditions and a moratorium on merger-related retrenchments, and to maintain a minimum number of employees at SAA, that the commission changed its mind and recommended conditional approval, it said.
Simelane said Takatso accepted the proposed condition to maintain a minimum number of employees at SAA for five years after the conclusion of the merger.
“Takatso has never harboured an unyielding desire to effect retrenchments as the first order of business. We will seek to ensure that the airline is optimally staffed, especially at the key management, technical and flight-operations levels, to ensure its agility in a highly competitive environment,” said Simelane.
SAA has about 2,000 employees.
The Takatso Consortium was announced 18 months ago as the strategic equity partner chosen to take a 51% stake in SAA. The government will retain 49% while the consortium puts up the R3bn required to acquire SAA.
Completion of the deal hinges on the government settling R3.5bn in historic SAA debt owed to creditors, and compensation to holders of tickets that could not be used before SAA went into business rescue.
Public enterprises minister Pravin Gordhan welcomed the deal, saying it marked “a significant step towards the completion of a deal that will strengthen SAA, provide the airline with the necessary capital to continue implementing its growth strategy and become a vital economic enabler for the country”.
He said the approval also “sends a very strong message about the government’s commitment and efforts to revitalise state-owned enterprises so that they can stand on their own, and help the country meet its developmental goals”.
The Takatso/SAA deal is subject to SAA settling its debt.
In a statement three weeks ago, the department said that regarding the outstanding R3.5bn required to finalise the business rescue process, the minister of finance allocated R1bn in the February budget, but the government was committed to providing the outstanding funding.
SAA interim chair Derek Hanekom said shortly after his appointment that the interim board did not want to place an unnecessary burden on the National Treasury.
“As SAA moves ahead we don’t expect any bailouts and we are going to work hard to ensure that SAA will look after itself.”
Hanekom said SAA planned to increase its routes on the continent and lease more aircraft as part of the turnaround.
• Harith’s executive director and Takatso chair, Tshepo Mahloele, is chair of Arena Holdings, our holding company.
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