The proposed deal involves Country Bird Holdings securing a controlling stake in Sovereign Food Investments. Country Bird brands include Supreme Chicken, Nutri Feeds and Ross Africa and its customers in Africa include KFC and Pizza Hut. Broiler firm Sovereign Food Investments covers breeding activities, broiler farming, food processing, animal feed milling and poultry processing and trading.
The Competition Commission provisionally approved the merger, subject to certain employment conditions that would only take effect if Country Bird snapped up more than half of Sovereign’s shares. While the conditions would have been relevant to Country Bird’s original July 2016 proposal to buy a majority stake in Sovereign, its latest revised offer allows for it to gain control of the business at a lower shareholding. The employment conditions would not be triggered were this to happen.
Sovereign therefore approached The Competition Tribunal and asked for a review of the Commission’s decision. The Tribunal has now ruled that the decision was based on a material error of fact, saying the terms under which the Commission had approved the merger were not clear.
“Central to our finding in this matter is an inherent uncertainty as to what merger the Commission approved. Whether it is the acquisition of de jure control by Sovereign, i.e. an acquisition of 50% plus one shares or the acquisition of de facto control, i.e. the ability to command a majority in a shareholding meeting.”
The Tribunal went on to find that the decision to approve the transaction, subject to conditions which may not come into effect, was based upon a material error of fact and should thus be set aside. It referred the decision back to the Commission for it to “reconsider its decision and to decide whether the merger should be approved and, if so, which appropriate conditions, if any, should attach to such approval”.
The Commission has 40 business days to come to a decision.
Country Bird, which is offering South African Rands (SARs) 9 (US$0.68) per Sovereign share under the terms of its bid, reported revenue of SAR3.6bn (US$271.9m) in its 2013-2014 financial results. Sovereign reported revenue of SAR1.7bn (US$130.9m) in the 2015-2016 financial year.