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Little scope for Walmart appeal - experts

Johannesburg - South Africa has little room to fight its own regulators over the approval of Walmart's R16.5bn bid for control of local retailer Massmart Holdings [JSE:MSM], lawyers said on Wednesday.

The Competition Tribunal approved the US firm's acquisition of Massmart with minimal conditions on Tuesday, prompting three government departments that opposed the deal to warn they could consider an appeal.

But such a legal move is unlikely, said Lulama Mtanga, a director at law firm Bowman Gilfillan.

"All the government departments who opposed the merger cannot take their argument any further," she said. "It is, therefore, the end of the road for these parties."

The departments of economic development, trade and industry, and forestry and fisheries said in a joint statement they would need further study to determine whether the conditions imposed on Walmart - such as a two-year freeze on job cuts - were sufficient to prevent widespread job losses.

"Based on the outcome of the study of the conditions and the responses of Walmart/Massmart, we will decide on the next steps to take. Government reserves its legal options at this stage," the departments said.

Alexis Apostolidis, head of Competition Law at law firm Adams & Adams said the government would first have to prove to a court that it has the right to an appeal.

"If they choose to appeal ... it would be opposed on the basis that they don't have locus standi," he said, referring to the right to address a court on a matter.

Union chance

But South Africa's powerful unions, which also opposed the deal and are considering their own appeals, may have a better chance at legal action, experts said.

"Only the merging parties and trade unions or employees can take a merger on appeal to the Competition Appeal Court," Mtanga said.

Any appeal could delay the deal first announced in September last year and but it is unlikely to put off Walmart's first foray in what should be a bright growth spot on the map, analysts said.

Shares in Massmart (MSM) were up 0.73% at R143.60, holding on to Tuesday's gains when the competition authorities gave the deal a nod and underscoring investors' optimism that deal is near completion.

"Obviously you can never be 100% sure about these things, but the reports that have come out are not enough to suggest that the deal is at risk," Martin Lentsoane, a trader at NEWS Trading said.

"The market is telling you that the deal will go through."

The rand currency extended recent gains to a three week high of R6.7720/$ against the dollar on Wednesday, partly on expectations of foreign currency inflows from the acquisition.

Walmart's head of international operations Doug McMillon said on Tuesday he hoped to finalise the acquisition in the next few weeks.

The deal was a test case for major foreign investment in South Africa, which has the continent's deepest capital markets but where unions are in a coalition with the ANC.

A government appeal could shake investor confidence in South Africa, some analysts have said.

"I struggle to understand or come to terms with government. Are they anti-business?" said David Shapiro, a fund manager at Sasfin Holdings.
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