Lewis has emerged victorious in its bid to intervene in merger proceedings in Pepkor’s proposed purchase of Shoprite’s furniture business for R3.2bn.
A decision by the Constitutional Court in favour of Lewis will go far in determining the rights of third parties in mergers & acquisitions in South Africa.
The apex court is yet to provide reasons for the order it has granted after the matter was heard on an urgent basis. The onus is on Lewis to show cause why the deal is anti-competition and would harm consumers.
“Lewis Group is satisfied with the Constitutional Court ruling which now allows the company the opportunity to participate fully in the process that will unfold under the guidance of the Competition Tribunal,” Lewis CEO Johan Enslin said.
“While this ruling allows Lewis the right to intervene, the final ruling of the Competition Tribunal will decide the competitive landscape of the furniture retail market.”
Pepkor and Shoprite opposed Lewis’s involvement, arguing that it is using competition law to delay or derail a transaction between rivals rather than to protect consumers.
Anthony Norton, MD at Nortons, which represented Lewis in the litigation, said the court’s order was a big victory for competition law, providing much-needed clarity on the rights of third parties seeking to intervene in mergers.
“Lewis’s position is a straightforward one: this is a highly anticompetitive merger and should be prohibited,” Norton said.
Pepkor wants to buy Shoprite’s furniture assets comprising more than 400 stores. The deal includes the OK Furniture and House & Home brands.
According to Lewis’s assessment, the merged entity would have a 59% market share based on store count in the relevant market, with more than 1,100 stores.
Pepkor warnings
In papers argued before the apex court and seen by Business Day, the retailer claims the deal will create an insurmountably dominant firm and lead to higher prices and worse credit terms, particularly for low-income consumers in rural and outlying areas, which have few national furniture retailers.
Pepkor’s warnings that allowing broad competitor intervention will undermine deal certainty and send a negative signal to investors failed to impress the court.
In an affidavit, Pepkor Lifestyle CEO Peter Mark Griffiths said major transactions could be held hostage for months, if not years, by litigation-heavy competitors, creating a chilling effect on investment.
The tribunal initially allowed Lewis to intervene extensively in the merger process. That decision was later overturned by the Competition Appeal Court, which was highly critical of the scope of the intervention rights granted.
The Constitutional Court’s order reinstates the tribunal’s earlier decision.
Zurayda Mayet, MD of Mayet & Associates, said the court order affirms that competitor intervention is permissible, but only if the intervenor can establish credible, substantiated concerns about genuine harm to competition or to consumers.
“The principal risks arising from the ruling include extended transaction timelines and heightened uncertainty, increased legal and advisory costs, and potential pressure on long-stop dates and related financing arrangements,” she said.
“In addition, parties can expect more intensive scrutiny of market definition and alleged consumer effects.”
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