SA to milk it as Clover deal looms large

NICOLA MILTZ

Last week, the Competition Commission approved, with conditions, the R4.8 billion sale of foods and beverages group Clover Industries to a consortium led by Tel Aviv-based Central Bottling Company (CBC).

“This is a good sign,” said a respected insider who wants to remain anonymous, “It’s not a done deal, but it’s a sign that things are going in the right direction.”

Clover’s shares surged last Friday afternoon after the announcement, closing 11.9% up at R23.50, according to business media reports.

The commission recommended that the Competition Tribunal approve the transaction, Clover said in a statement. The deal has elicited widespread criticism from the Boycott, Divestment, Sanctions campaign (BDS), the Congress of South African Trade Unions (COSATU), and the trade union Food and Allied Workers Union (FAWU).

The Competition Commission is a statutory body constituted in terms of the Competition Act. While the commission is the investigative and enforcement agency, the Competition Tribunal is the adjudicative body which rubber stamps decisions and adjudicates on matters referred to it by the commission. The Competition Appeal Court considers appeals against the decisions of the tribunal.

One of the purposes of the Competition Commission is to investigate, control, and evaluate restrictive business practices, abuse of dominant positions, and mergers in order to achieve equity and efficiency in the South African economy. It does this to promote employment and advance the social and economic welfare of South Africans, among many other things.

Earlier this year, Johannesburg Stock Exchange-listed Brimstone Investment Corporation bowed out of the multibillion-rand foreign direct investment (FDI) deal led by CBC to buy South Africa’s biggest dairy producer. This followed huge pressure from anti-Israel lobby groups, who accused CBC of being complicit in human-rights abuses and violating international law.

Investment company Brimstone was forced to reconsider its participation after the “widespread outrage”. The consortium, however, reiterated its commitment to the deal in spite of this.

The alleged threats and intimidation by BDS-SA and other anti-Israel lobby groups took their toll on Mustaq Brey, the chief executive of the JSE-listed company. Brey and his partner, Fred Robertson, the executive chairman and co-founder of the successful, proudly South African company, faced a barrage of questions at the Brimstone annual general meeting (AGM) held recently.

Marc Hasenfuss of BusinessLIVE said Robertson fielded heated questions at the meeting. “Judging by the audience reaction, there are a few shareholders quite bitter that the sweet, sweet Clover deal slipped away,” he wrote.

The Israeli-led deal appears to be going ahead in spite of Brimstone’s exit. Brimstone engaged in negotiations with potential replacement black economic empowerment (BEE) investors to take up its 15% in the consortium.

CBC is leading the transaction as the biggest shareholder in the Milco consortium (the entity that has offered R4.8 billion to buy Clover Industries).

According to Clover, the conditions of the deal relate to, among other things, employment and local procurement “which were part of the investment case for the consortium Milco SA. The conditions applicable to the implementation of the Clover scheme are acceptable to both parties.”

The Competition Tribunal’s hearings are open to the public. In almost all cases, three tribunal members must hear a case and make a decision. Clover said the tribunal hearing would take place in coming weeks.

CBC, which is Israel’s leading maker and distributor of popular beverages including Coca-Cola, Fuze Tea, Tuborg, and Carlsberg beers, sees the Clover deal as a way of expanding its operations in Africa. Clover, meanwhile, has 8 000 employees, and operates 13 plants.

The transaction will culminate in Clover’s de-listing.