Business

Tough conditions set for Ram�s acquisitions

Ottapathu
 
Ottapathu

The restrictions were announced by the CA this week as it set out conditions to prevent any possible competition concerns that may arise from Ottapathu’s proposed acquisition of Warbler Holdings.

Ottapathu, through his company called Bluehearts (Pty) Ltd, seeks to acquire the entire issued shareholding of Warbler Holdings, a holding company for four firms, IT4 Africa (Pty) Ltd, Goldtech Enterprises (Pty) Ltd, Healthwest Africa (Pty) Ltd and Solid Logistics (Pty) Ltd.

Goldtech Holdings and Healthwest are suppliers to local retailers  such as Sefalana and Furnmart with the former distributing home and kitchen appliances, personal grooming products and consumer electronics under the brand names of Samsung, Kenwood, Wahl and Sinotec.

On the other hand, Healthwest Africa supplies Sefalana with home appliances, consumer electronics and personal grooming and kitchen appliances under the brand name of Hisense and Philips.

 The CA’s decision follows a complaint raised by Sefalana in which they feared that although Ottapathu will be buying Warbler in his personal capacity, he might use his new acquisitions to disadvantage Sefalana in an uncompetitive manner.

In a merger decision notice issued on Monday, the authority said it decided to authorise the proposed acquisition on condition that the transaction is not likely to result in the prevention or substantial lessening of competition, or endanger the continuity of the services offered in the distribution of branded consumer electronics to resellers.

The authority also stated that it wanted assurance that the market structure in the distribution of branded consumer electronics to resellers will not be altered as the acquiring entity will be inheriting the position of the target enterprise.

“The authority’s analysis identifies potential competition concerns which could arise in the retailing of branded consumer electronics market, given that post-merger, the acquirer will be present in both the upstream and downstream markets,” it said.

As such, it added, this potentially has the ability and incentive to foreclose players in the downstream market, particularly in instances where the merged entity is a sole distributor of the branded products, and where it enjoys a dominant position. Another condition was that Bluehearts will continue to supply the same retailers that were previously supplied by Warbler Holdings on terms no less favourable to those offered by Warbler to the retailer’s pre-merger.

Warbler Holdings was also ordered to submit a detailed list of its current customers and trading terms to the authority in two weeks after the decision date.

Furthermore, the authority stated that within 12 months from the decision date, Ottapathu is to divest his interests in five of his companies, namely Montrose Investments t/a RiteFurn; Callao t/a RiteFurn; Peardale t/a RiteFurn; Decolite t/a RiteFurn and Mont Catering and Refrigeration, and shall inform the authority of this disposal within 30 business days of concluding the final sale agreement.

“In addition, for a period of five years from the implementation date, Ottapathu should not either as a principal, agent, partner, representative, shareholder, director, employee, consultant, advisor, financier, or in other like or similar capacity, directly or indirectly be associated with, interested or engaged in any firm, business, company or other association of persons which carries on a business activity similar to the business carried on by the companies listed above,” said CA.

In view of the fact that Ottapathu also has controlling interests in Choppies, which deals with the retailing of branded consumer electronics, shall for a period of five years from the date of the decision, not enter the market for the retailing of branded consumer electronics currently traded by Warbler Holdings for as long he (Ottapathu) has a stake in Choppies.

However, in the event that Choppies Enterprises Limited decides to enter this market, Ottapathu is to immediately notify the authority of this intent and the terms under which Choppies would be supplied by Bluehearts.

Contacted for comment, Ottapathu said he has already adhered to the conditions set by the competition agency, stating that he is “happy about the decision”.