BY MTHANDAZO NYONI
THE Competition and Tariff Commission (CTC) approved six merger transactions during the last quarter of 2021, as companies sought to increase their market share and expand into new geographic areas among other reasons.
In the period under review, the commission received 12 merger notifications from companies in different sectors of the economy.
For instance, K2020893770 (South Africa) Proprietary Ltd was targeting Sybrin Systems Proprietary and Sybrin Limited, Distribution Group Africa was targeting a merger with National Foods Logistics.
The CTC said Tuinbouw Zonder Grenzen and Claremont Orchards Holdings submitted their proposal, Sana Partners Fund 1 and Continental Compounders Proprietary also proposed a merger.
In addition, the CTC said Hudaco Trading Proprietary and Southern African Business Unit also made a submission, according to the CTC.
Jade Investments was targeting Afrifor, Innscor Africa was targeting Landos Farm, Holding Ecuatorial Guinea 2020 S, among several other submissions.
Some of the transactions which were approved included the acquisition of up to 100% of the issued ordinary shares of Adapt IT Holdings Limited by Volaris Group Inc as well as the acquisition of Ascendis Vet, Ascendis Animal Health, Kyron Laboratories and Kyron Prescriptions by Sun Valley Estates.
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Volaris acquired direct controlling interest in the business of Adapt IT.
Volaris is incorporated in terms of Canadian laws and does not have a physical presence in Zimbabwe, though it derives revenue through selling software to Zimbabwe.
Adapt IT is incorporated under the laws of South Africa and is a specialised software business solutions provider.
Both parties, Volaris and Adapt IT offer services as vertical market software companies in the broader information technology software solutions industry.
The commission identified the relevant market as the provision of vertical market software solutions in the whole of Zimbabwe.
Since the players were both developers of software to similar markets and sometimes to the same customers the merger was classified as a horizontal merger.
“The commission investigation revealed that the transaction between Volaris and Adapt IT is less likely to alter market structure in Zimbabwe because the merging parties are not present in Zimbabwe,” the CTC said.
“Other local and international software developers will continue to pose effective competition to the merged entity. Post-merger the parties will be having a mere 2% of the market share implying that they will not be able to independently raise price thereby dismissing unilateral effects.”
CTC said the relevant market in this transaction was mostly dominated by foreign software companies as the consumption of locally developed software is low.
Given the nature of the relevant market, the commission said import competition is rife and any desire by the merged entity to operate anti-competitively will result in a switch to other software developers around the world.
In light of the forgoing, the commission approved the merger without conditions.
In the period under review, the commission also approved acquisition of Ascendis Vet Limited, Ascendis Animal Health, Kyron Laboratories Limited and Kyron Prescriptions by Sun Valley Estates.
Sun Valley is currently a dormant South African company ultimately controlled by Acon Agri and Food Limited which is a leading South African vertically integrated agriculture and food group. It is publicly traded on the Johannesburg Stock Exchange.
“The companies being acquired operate within the animal health industry and are involved in the development, importation, manufacturing, warehousing, distribution and marketing of animal health medication.
From the targeted enterprises, only Kyron laboratories and Kyron Prescriptions make sales to Zimbabwe,” CTC said.
“From the analysis, the commission found that the merger had no negative effects on competition because the transaction was not going to change the structure of the market locally.
“In light of that, the commission approved the merger without conditions.”