Milco/Clover merger approved after improvements made

The Tribunal said it had concerns with the merging parties’ tendered employment-related conditions in terms of which 516 workers would be retrenched as a result of the completion of Project Sencillo, a Clover project under way to ensure better utilization of its assets (factories, production lines, warehouses and trucks), the completion of which is expected to take up to five years.

The merging parties further tendered to not retrench any employees as a result of the completion of Project Sencillo for a period of two years from the implementation date of the proposed merger.

The Competition Commission concluded the planned retrenchments as a result of Project Sencillo were substantial. It also concluded that it could be inferred that these retrenchments were related to the proposed merger i.e. merger-specific. The merging parties, however, argued that the planned retrenchments were operational and unrelated to the proposed transaction.

The Commission recommended the conditional approval of the proposed transaction, accepting the merging parties’ tendered conditions, including the 516 retrenchments subject to a two-year moratorium, given that the merged entity would also create jobs.

The General Industries Workers Union of South Africa (GIWUSA), the Food and Allied Workers Union (FAWU) and the Inqubelaphambili Trade Union (ITU) all raised concerns about the effects of the proposed transaction on employment in South Africa, specifically in relation to the planned retrenchments as a result of Project Sencillo. The Tribunal allowed the unions to make both written and oral submissions and to put questions to the merging parties’ witnesses.

In relation to the creation of new jobs, the merging parties said the merged entity will, in the five-year period following the implementation date, create 550 new permanent employment positions at Clover through the expansion of Project Masakhane, a Clover project to increase its distribution reach into previously under- and unserved areas including the increase of Clover's delivery points at the bottom-end of the market. These new positions will consist mostly of sales representatives, drivers and van assistants.

While the Tribunal hearing was ongoing, the merging parties agreed to lower the number of planned retrenchments as a result of Project Sencillo from the original 516 job losses to a maximum of 277 jobs, after updating the numbers and further considering a range of mitigating factors as suggested by the Tribunal. The Tribunal accepted these new figures, but in its final imposed conditions increased the moratorium on the retrenchments as a result of the completion of Project Sencillo from the original two-year period from the implementation date to a three-year period.

The new company will also contribute reasonable relocation and training costs for the affected employees that successfully apply for a vacant or new position in Project Masakhane, and will be offered the opportunity to apply for and will receive preference in relation to any new or vacant Clover position.