CompCom moves to scrap Premier-RFG merger over factory shutdown

The Competition Commission (CompCom) has filed an application with the Competition Tribunal asking for a withdrawal of the tribunal’s decision to conditionally approve the merger between Premier Group and RFG Holdings.

The application follows its investigation of a complaint lodged by, among others, the South African Clothing and Textile Workers Union (Sactwu) over claims of a breach of merger conditions.

The labour union took the food producer to task after announcing plans to wind up RFG’s fruit-canning facility in Tulbagh, in the Western Cape, which it considered commercially strained due to current market conditions.

Sactwu considered this to be inconsistent with assurances made during the merger, including that Premier would adhere to employment protections after the 6 March approval.

Read: Premier forecasts revenue jump from RFG acquisition

Before the merger was referred to the tribunal, it’s understood Premier had not expressed any plans of closing nor disposing of any manufacturing facilities or production lines, or equipment after the merger.

The merger was subsequently implemented on 30 March.

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Four months after the merger was implemented, Premier informed the commission that it intended to close RFG’s fruit-canning facility in Tulbagh, Western Cape.

The facility, Fruit Processing Western Cape, is one of only two fruit-canning facilities in South Africa and provides an important route to market for approximately 200 Western Cape fruit growers.

As a significant regional employer, the factory proposed closure would affect more than 400 permanent and fixed-term employees, as well as thousands of seasonal workers across the broader agricultural value chain.

The union said this flies against what the merger parties agreed to.

Read:
Premier Foods factory closure: Talks break down
Life in Tulbagh depends on its canning factory, which is now shutting down
SA’s fruit canning industry under threat as Premier Foods plans closure

In a statement on Wednesday, Competition Commissioner Doris Tshepe confirmed that its investigation found that Premier and RFG had failed to disclose information about the contemplated closure to the commission and the tribunal.

This is “despite the parties having known of and discussed the option to do so before the tribunal approved the merger”.

“The non-disclosure denied the commission and the tribunal an opportunity to assess and address the closure’s competition and public-interest implications before approving the merger.

“Withholding material information, whether by omission or as a deliberate act, undermines the integrity of the merger-control regime and may result in the revocation of an approved merger,” Tshepe further cautioned.

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The commission said the contemplated closure of the Tulbagh cannery was material to the assessment of both the competition and public-interest aspects of the merger as it would remove the only competitor to Langeberg from the South African market, effectively creating a monopoly in the sector.

Read:
RFG earnings slide as Premier takeover looms
Premier posts double-digit earnings growth, lifts dividend

“The integrity of South Africa’s merger-control regime depends on merger parties making full, frank and honest disclosure of all material information,” commissioner Tshepe added.

The tribunal is now set to consider the revocation application.

Premier’s share price took a knock on Wednesday, following the CompCom’s announcement. It traded nearly 4% lower by 11am at a price of R170.24.

Premier share price

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