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The Tribunal has approved, with conditions, the proposed transaction whereby the Industrial Development Corporation SOC Ltd (the IDC) seeks to acquire the clothing and footwear manufacturer, Celrose (Pty) Ltd (Celrose).
 
The IDC is government-owned and gives financial support to businesses. It also provides finance to entrepreneurs through loans and equity. The IDC holds interests in several companies and industries such as textiles, clothing and agriculture.
 
Edcon Limited (Edcon) is a majority shareholder in Celrose. Celrose owns Eddels Shoes (Pty) Ltd (Eddels) and supplies clothing and footwear to the Edcon group and other retailers in South Africa and Zimbabwe.
 
To address merger-related employment concerns by trade unions, the Tribunal has approved the transaction subject to the following conditions:
Celrose shall not retrench any employees as a result of the merger for a period of five (5) years from the implementation date of the merger;
For the sake of clarity, retrenchments do not include (i) voluntary retrenchment and/or voluntary separation agreements; (ii) voluntary early retirement packages; (iii) unreasonable refusals to be redeployed in accordance with the provisions of the Labour Relations Act; (iv) resignations or retirements in the ordinary course of business; (v) retrenchments lawfully effected for operational requirements unrelated to the merger; (vi) terminations in the ordinary course of business, including but not limited to dismissals as a result of misconduct or poor performance; and (vii) any decision not to renew or extend a contract for a contract worker; and
Celrose must, during the first five-year period of the Merchandise Supply Agreement, provide reports to the Commission in relation to the Agreement.
Background
 
In its assessment, the Commission was of the view that the merger is unlikely to substantially prevent or lessen competition in any market. In relation to public interest concerns, the IDC and Celrose said the merger would not result in job losses or negatively impact employment.
 
However, NULAW and SACTWU raised employment concerns relating to Edcon’s exit as a controlling shareholder of Celrose. The unions said employment at Celrose and Eddels would likely be negatively impacted, in the absence of commitments that post-merger Edcon would continue to buy the same/similar volumes of footwear and clothing from Celrose and Eddels.
 
The IDC and Celrose, in turn, said an amended and reinstated merchandise supply agreement will ensure that Edcon continues to procure products from Celrose and Eddels post-merger. The IDC and Celrose also undertook that the merger will not result in any retrenchments.
 
Despite these submissions, the unions remained concerned about the transaction’s possible effects on employment. In order to address their concerns, the Tribunal has approved the merger subject to the conditions.

Issued by Competition Tribunal