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Pretoria - Any attempt to impose conditions on United States retail giant Walmart's R16.5bn acquisition of Massmart Holdings [JSE:MSM] will violate numerous international trade agreements signed by the South African government, the Competition Tribunal heard on Monday.
"International law would be violated if conditions protecting the domestic market were enforced," Jeremy Gauntlett, acting for the merging parties, said in closing arguments at the tribunal.
In heads of argument submitted to the tribunal, it was pointed out that the imposition of restrictions and conditions on Walmart would violate Article III of the General Agreement on Tariffs and Trade.
Gauntlett said the tribunal "does not have the power to exempt South Africa from international law obligations".
Walmart also warned that it could walk away from the deal if South Africa demanded targets on using local suppliers.
It said while it would not cut jobs for two years and would spend R100m developing local suppliers, it would not be as flexible on supplier targets - a government and union concern.
The Competition Tribunal is in the final day of more than a week of testimony on whether to allow the world's largest retailer to buy a controlling stake in discount retailer Massmart.
The government and unions are concerned about Walmart's global supply network which, they say, could lead to a flood of cheap imports, spark job losses and squeeze local suppliers. They have asked for targets on using local suppliers and a freeze on job cuts.
"The parties may reluctantly walk away from the deal if there are conditions on local procurement," Gauntlett told the hearing.
Walmart's comment came after the Competition Commission changed its stance and said the tribunal should impose conditions, such as rehiring 503 former employees.
Unions have said the employees were sacked because Massmart wanted to make itself a more attractive takeover target.
The commission had previously recommended the deal be approved without any conditions. An official for the commission said it changed its views after hearing additional testimony.
Not missing much
It would not be a huge loss for Walmart if the deal were to fall through, said Channing Smith, managing director of Capital Advisors Growth Fund, which has about $900m in assets under management and holds Walmart shares.
"They could still enter that market five years from now and I don't think they're going to have missed out on much," he said.
"As investors, we think the bigger opportunity continues to be in China, in India and Brazil, where you have incomes rising at a much higher rate than you do in Africa."
Patric Mtshaulana, a lawyer for the Competition Commission, told the tribunal it should force Massmart to rehire 503 employees sacked last year and that the merged entity should honour existing agreements with trade unions for three years.
A lawyer for Walmart told the tribunal the merged entity would give the workers preference for new job openings which came up. It also pledged to honour Massmart union agreements.
The hearings were expected to conclude on Monday, with a judgement expected in about 10 working days.
South Africa has a history of imposing weighty conditions on foreign takeovers.
Last month it approved a takeover bid from Japan's Kansai Paint for local paint company Freeworld Coatings [JSE:FWD], but stipulated the Japanese firm had to sell one of Freeworld's businesses, build a new factory and not cut jobs for three years.
In a separate move in neighbouring Namibia, that country's competition commission said it would appeal a high court decision preventing it from attaching conditions to Walmart's takeover of Massmart's Namibian operations.
Massmart shares were down 0.3% at R139.63. Walmart's offer is worth R148.
"International law would be violated if conditions protecting the domestic market were enforced," Jeremy Gauntlett, acting for the merging parties, said in closing arguments at the tribunal.
In heads of argument submitted to the tribunal, it was pointed out that the imposition of restrictions and conditions on Walmart would violate Article III of the General Agreement on Tariffs and Trade.
Gauntlett said the tribunal "does not have the power to exempt South Africa from international law obligations".
Walmart also warned that it could walk away from the deal if South Africa demanded targets on using local suppliers.
It said while it would not cut jobs for two years and would spend R100m developing local suppliers, it would not be as flexible on supplier targets - a government and union concern.
The Competition Tribunal is in the final day of more than a week of testimony on whether to allow the world's largest retailer to buy a controlling stake in discount retailer Massmart.
The government and unions are concerned about Walmart's global supply network which, they say, could lead to a flood of cheap imports, spark job losses and squeeze local suppliers. They have asked for targets on using local suppliers and a freeze on job cuts.
"The parties may reluctantly walk away from the deal if there are conditions on local procurement," Gauntlett told the hearing.
Walmart's comment came after the Competition Commission changed its stance and said the tribunal should impose conditions, such as rehiring 503 former employees.
Unions have said the employees were sacked because Massmart wanted to make itself a more attractive takeover target.
The commission had previously recommended the deal be approved without any conditions. An official for the commission said it changed its views after hearing additional testimony.
Not missing much
It would not be a huge loss for Walmart if the deal were to fall through, said Channing Smith, managing director of Capital Advisors Growth Fund, which has about $900m in assets under management and holds Walmart shares.
"They could still enter that market five years from now and I don't think they're going to have missed out on much," he said.
"As investors, we think the bigger opportunity continues to be in China, in India and Brazil, where you have incomes rising at a much higher rate than you do in Africa."
Patric Mtshaulana, a lawyer for the Competition Commission, told the tribunal it should force Massmart to rehire 503 employees sacked last year and that the merged entity should honour existing agreements with trade unions for three years.
A lawyer for Walmart told the tribunal the merged entity would give the workers preference for new job openings which came up. It also pledged to honour Massmart union agreements.
The hearings were expected to conclude on Monday, with a judgement expected in about 10 working days.
South Africa has a history of imposing weighty conditions on foreign takeovers.
Last month it approved a takeover bid from Japan's Kansai Paint for local paint company Freeworld Coatings [JSE:FWD], but stipulated the Japanese firm had to sell one of Freeworld's businesses, build a new factory and not cut jobs for three years.
In a separate move in neighbouring Namibia, that country's competition commission said it would appeal a high court decision preventing it from attaching conditions to Walmart's takeover of Massmart's Namibian operations.
Massmart shares were down 0.3% at R139.63. Walmart's offer is worth R148.
