TFG says at this stage 4855 jobs will be saved by through sale of Jet Stores.
Photo: Gallo Images/Papi Morake
- The Competition Tribunal heard the Competition Commission’s recommendation for conditional approval of the sale of Jet Stores to The Foschini Group.
- The Commission said it investigated competitor concerns that the merger would give TFG a dominant position, but it is not convinced that would be the case.
- The Tribunal also heard that TFG will transfer more Jet Stores than initially agreed, resulting in more jobs being saved.
The Competition Commission says it does not see any reason why the acquisition of Jet Stores by The Foschini Group (TFG) should be prevented, despite concerns raised by competitors that TFG would enjoy market dominance.
The watchdog recommended that the proposed transaction be approved with certain conditions including increasing TFG’s procurement of merchandise in SA and trying to save more Jet stores than the fashion retailer initially agreed to takeover. TFG offered to buy some Jet Stores for R480 million in July.
But the Competition Tribunal heard on Wednesday that concerns have been raised by the South African Commercial, Catering and Allied Workers Union (Saccawu) and competitors like Mr Price.
Tribunal Member, Enver Daniels said Mr Price was concerned that the lower rental rates that Jet managed to negotiate, as well as the roughly R800 million worth of stock that TFG will get as part of the deal will give it an unfair a competitive advantage.
The Commission however, said its investigations showed that TFG is not acquiring a dominant position.
TFG’s market share gains post Jet acquisition
In SA, the acquisition of 381 Jet stores will increase TFG’s market share in the whole apparel market to 22% after the merger. For clothing specifically, TFG’s market share would increase by 7.2% to 24.6% and in footwear, the group will command a 35.4% market share. But TFG will gain the most in the lower LSM market where its clothing market share is set to increase by almost 18%.
“Taken as a whole from a competition perspective, the Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition in the respective markets,” said Billy Mabatamela, an analyst at the Commission.
As for the stock that TFG will be getting for free without paying suppliers that are still being owed by Edcon, the Commission said such concerns should be addressed in a different forum because they were a result of Edcon’s ailing finances, not the merger.
Commission’s principal analyst, Ratshidaho Maphwanya added that it was difficult to conclude that a company getting free stock once-off would result in a long-term dominant position.
“To the extent that this gives the merged entities some sort of competitive advantage as claimed by Mr Price, we find that to be unlikely largely because if there was a competitive advantage, it would only be relevant for one stock run,” said Maphwanya.
TFG and Edcon’s legal team also added that the stock is outdated and because stores that are being bought continued to trade while the acquisition process was ongoing, the value of that merchandise has diminished significantly.
TFG could revive more Jet Stores than initially agreed
TFG initially offered to but 371 of commercially viable Jet Stores. That figure went down to 333 stores when the sale agreement was signed given the leases that could be negotiated with the landlords. But now 381 stores in SA and another 42 stores in SADC countries that will be transferred.
“I’m told that there is a handful of stores that are still engaged in negotiations that may go across, but the number won’t increase materially above the 381,” said the merging parties lawyer, Mark Gardner.
The efforts to increase the number of Jet stores that will be retained post-merger means that at this stage 4855 jobs will be saved by through sale of Jet Stores. Of Edcon’s total workforce of approximately 17 000, about 2 400 have been retrenched, another 3 5000 took voluntary severance packages. Between the TFG deal and Retailability’s acquisition of Edgars stores, roughly 10 000 jobs will be saved, said the merging parties on Wednesday.
Saccawu which wanted to be a recognized union when Jet employees move over to TFG also asked for a five-year moratorium on retrenchments. However, Edcon and TFG’s legal team said would agree to include moratorium for only 2 years. The Tribunal has reserved its decision.
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