Competition Tribunal approves 'lifeline' Edgars merger with conditions | Fin24
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Competition Tribunal approves 'lifeline' Edgars merger with conditions

May 09 2019 17:30
Carin Smith

The Competition Tribunal announced on Thursday that it has approved, with certain conditions, a large merger that will see a new company purchasing the entire issued shares of Edgars Consolidated Stores Limited.

The proposed transaction followed a failed attempt to restructure the Edcon Group in 2016.

Fin24 reported at the end of April that the Competition Commission recommended to the Tribunal that the proposed acquisition of ECSL by shelf company New HoldCo should be approved. The Commission said it found that the proposed transaction was unlikely to result in a substantial prevention or lessening of competition in the relevant markets.

The Commission argued that the merger would give the ailing retailer a much-needed lifeline and possibly help avoid job losses.

The Tribunal pointed out that the Edcon Group (ECSL, Edcon Limited and all their subsidiaries) is in financial distress and at risk of being forced into business rescue or insolvency proceedings.

"The merger is intended to achieve a restructuring and recapitalisation of the debt and equity structure of Edcon Limited. This is to provide a stable platform for the planned turnaround of the Edcon Group," the Tribunal said in a statement.
The conditions put by the Tribunal for the merger to go through relate to ECSL and Edcon Limited's commitment to "fostering and developing a more competitive production environment in South Africa".

This involves increasing local procurement, BEE participation - including replacing the Edcon Staff Empowerment Trust to safeguard the rights and interests of beneficiaries - and ensuring that there are no job losses as a result of the merger.

New HoldCo has no previous operations or activities in South Africa and has been established for the purposes of acquiring the entire issued share capital of the Edcon Group, according to the Commission.

The shareholders of New HoldCo comprise local and international financial investors in the form of private equity investments firms and banks. None of the shareholders conduct any clothing retail activities or exercise any form of control over New HoldCo, the statement added.
Recently, Edcon's shareholding in Celrose was acquired by the Industrial Development Corporation (IDC). This transaction also included the imposition of local procurement conditions.



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