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The Competition Commission (‘Commission’) has published Draft Amended Public Interest Guidelines relating to Merger Control.

The Bravura Corporate Finance team thought that you may find the following points of interest.

  • Despite the recent case law developments, the Commission seems to maintain that (at least in the first instance) remedies to correct perceived public interest related harm must be like-for-like.  In other words, where there is perceived harm to the spread of ownership, a remedy that increases the spread of ownership must be applied – i.e. the Commission will not easily accept an offer to increase levels of employment, supplier developments, or other forms of investment to counteract a potential decrease in the percentage of HDP ownership.
  • Where a transaction results in a decrease in the level of HDP and/or worker ownership, any ESOP remedy imposed must fully offset the decrease – i.e., if a merger results in a 10% decrease in the level of HDP ownership, the Commission will expect the parties to put in place an ESOP with a 10% interest.  Furthermore, in terms of the Commission’s Guidelines employees may not be required to pay for the shares issued to the ESOP and the acquiring firm must, at its own expense, make provision for independent legal, financial, and other experts to act on behalf of the employees in respect of the establishment of the ESOP.
  • Where an HDP / B-BBEE transaction is proposed to cure an identified harm, the Commission will only accept, at a minimum, a shareholding of 25% plus 1 share, and such shareholding should ideally confer joint control to the HDP / B-BBEE partner.  In the Commission’s view, a smaller shareholding (or non-controlling shareholding) is likely to be viewed as ‘non-responsive’ to the requirement to promote a greater spread of ownership.

We realise that these are not insignificant proposed amendments, and that there may be considerable impact on businesses in leadership, succession planning, and stakeholder management along with a host of other items.

The Bravura team is always available to answer questions, assist with planning and help deliver a unique strategy for your business.