The Coca-Cola Beverages Africa merger parties welcome Competition Tribunal Approval for formation
May 10, 2016
The Coca-Cola Beverages Africa (CCBA) merger parties – SABMiller plc, The Coca-Cola Company, and Gutsche Family Investments – have welcomed the approval given by the South African Competition Tribunal, with agreed conditions, to the formation of Africa’s largest soft-drink beverage operation. The parties said the decision is an endorsement that the merger will support the business agenda within the broader South African political and social context.
The Tribunal’s approval of the merger follows agreements reached between the merger parties and the South African Government, unions and the Competition Commission on a comprehensive set of commitments that will ensure the formation of Africa’s leading Coca-Cola bottling partner helps support economic and social development in South Africa. The merger parties expect the transaction to complete as soon as practicable.
The commitments include detailed conditions related to employment, access to retail cooler space for smaller competitors, localisation of production and inputs used in the production of Coca-Cola products and Appletiser brands, economic empowerment and the location of its headquarters and tax residency in South Africa.
The merger parties undertook to ensure that the merged entity maintains its total permanent employment at current levels for a period of three years from the date of approval of the deal; that there will be no involuntary retrenchments of employees in the bargaining unit and that retrenchments of non-bargaining unit skilled staff be limited.
The merger parties have agreed to invest R800 million to support enterprise development for two groups of entrepreneurs. They will create a R400 million fund for enterprise development in the agriculture value chain, particularly to support and train historically disadvantaged developing farmers and small suppliers. They will also make a R400 million incremental investment to develop downstream distribution and retail aspects of Coca-Cola Beverages South Africa (CCBSA) as well as the skills development of an additional 25,000 black-owned retailers of CCBSA’s products.
In committing itself to broad-based black economic empowerment aligned to the SA government’s imperative to equalise economic opportunity, the merger parties have also agreed to increase black ownership of CCBSA to 20% and will sell a 20% shareholding in Appletiser South Africa to black shareholders who will play an active role in the business.
The merger parties also agreed to a number of commitments which align closely with other national imperatives, including granting the freedom in certain circumstances for small retail outlets to provide space in Coca-Cola coolers for smaller competitors’ products. Appletiser SA and its South African production operations will be maintained to both grow the operations domestically and serve as a base from which to export Appletiser.
The headquarters of CCBA and CCBSA will be located in South Africa, ensuring the companies will remain tax-resident in the country and bring additional revenues to local and national governments. Headquartering CCBA in South Africa will further cement the country’s standing as the investment and business ‘gateway to Africa’; and the proposed merger of CCBA demonstrates a clear commitment by the merger parties to invest in South Africa for the long term.
Alan Clark, CEO, SABMiller noted: “The creation of Coca-Cola Beverages Africa is more than the creation of a company with common interests and a long term growth plan: the merger is set to deliver demonstrable benefits to South Africa by way of significant inward investment and additional tax revenues, job creation and a number of specific benefits that address the national imperatives of SMME creation, local procurement, transformation, and growth in the agricultural sector.”
James Quincey, President and Chief Operating Officer of The Coca-Cola Company commented: “ Today’s announcement ensures that the creation of Coca-Cola’s largest bottling partner in Africa will strengthen our business while also closely aligning with the South African government’s national imperatives for social and economic development. Coca-Cola has been firmly committed to our business in Africa and supporting local communities since we first began operations in South Africa almost 90 years ago, and this agreement marks the latest important step in that journey.”
Gutsche Family Investments (GFI) chairman Phil Gutsche said: “I am delighted that, with the approval of the merger by the Competition Tribunal, we will be able to deliver the significant benefits promised by the creation of CCBA. Given the scope and reach of the new company, and its commitment to being headquartered in South Africa, the merger helps position the country as the undisputed economic gateway to Africa.”