For the Foschini Group Limited (TFG) to acquire Tapestry Home Brands it has to establish new retail stores across the group, create new job positions and introduce a historically disadvantaged persons shareholder.
These were the main conditions the Competition Tribunal has imposed on the merging parties, it said in a statement on Friday, outlining its reasons for conditionally approving the large merger.
Following the proposed implementation, TFG will exercise sole control over Tapestry in a R2.43 billion deal. The approval means TFG will expand its business, which will include producing furniture and mattresses.
The Tribunal’s conditions include a three-year moratorium on any merger-related retrenchments.
In addition, the conditions stipulate that there would be no downward variation of wages and conditions of work in relation to employees of the merged entity, as a result of the proposed transaction.
Furthermore, provided it was economically feasible to do so, the merged entity would, within a specified period, establish new retail stores across the Tapestry Brands and create new positions to service the new stores, the Tribunal said.
“In the event that the Commission discovers that there has been an apparent breach of these conditions, this shall be dealt with in terms of rule 37 of the rules for the conduct of proceedings in the Competition Tribunal read together with rule 39 of the rules for the conduct of proceedings in the Competition Commission,” it said.
According to the Tribunal, the proposed merger would result in a substantial prevention or lessening of competition in any relevant market.
“Among others, the Tribunal considered the market shares; the closeness of competition between the parties; and competitive constraints posed by alternative suppliers. The merger parties will continue to face competition from other established players in the market and it is unlikely that the merger will grant the merged entity the ability to price unilaterally post-merger,” it said.
The Tribunal said the proposed transaction would not result in any job losses and was likely to result in the creation of new jobs throughout the TFG value chain, according to the merger parties.
"Post-merger, an historically disadvantaged persons shareholder will be introduced within the Tapestry Group, and this will have a positive effect on the spread of ownership. Having considered this and the conditions relating to expansion commitments and employment, the Tribunal is satisfied that the public interest concerns are adequately addressed,“ the Tribunal said.
The TFG Group is an independent chain-store group with a diverse portfolio of fashion retail businesses offering clothing, jewellery, cellphones, accessories, cosmetics, luggage, sporting apparel and equipment, homeware, and furniture.
Of particular relevance to the proposed transaction are the activities of TFG in the broader homeware sector. TFG controls numerous firms including Prestige Clothing, Foschini Stores, Cotton Traders, and Markhams.
Tapestry is a manufacturer and retailer of household textiles, furniture, bed sets, and mattresses. The Tapestry Group also offers a portfolio of popular home furnishing consumer brands such as Dial-a-Bed, the Bed Store, Volpes and Coricraft.
Tapestry owns 175 stores in South Africa, Namibia, and Botswana and has manufacturing facilities in Cape Town, Johannesburg and Gqebera, and makes about 47% of its products locally.
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