The Competition Tribunal recently approved the acquisition by Wal-Mart Stores Inc of a controlling interest in Massmart Holdings Limited, subject to conditions.

Massmart conducts wholesale and retail operations through a variety of chain stores, including Game, Makro, Dion Wired, Builders Warehouse, Builders Express and Builders Trade Depots. Massmart's operations are predominantly based in South Africa, but it also has operations in a number of other African countries.

Wal-Mart is the world's largest retailer with operations in the United States and 15 other countries. It employs more than two million people around the world. This transaction is Wal-Mart's first acquisition in Africa.

The conditions imposed by the tribunal are as follows:

  • The merged entity must ensure that there are no retrenchments, based on the merged entity's operational requirements in South Africa resulting from the merger, for a period of two years from the effective date of the transaction. For the sake of clarity, retrenchments do not include voluntary separation agreements, voluntary early retirement packages and unreasonable refusals to be redeployed in accordance with the Labour Relations Act 1995 (as amended).
  • The merged entity must, when employment opportunities become available within the merged entity, give preference to the reemployment of the 503 employees that were retrenched during June 2010 and must take into account those employees' years of service in the Massmart group.
  • The merged entity must honour existing labour agreements and must continue to honour the current practice of the Massmart group not to challenge the current position of the South African Commercial, Catering and Allied Workers' Union, as the largest representative union within the merged entity, to represent the bargaining units, for at least three years from the effective date of the transaction.
  • The merged entity must establish a programme aimed exclusively at the development of local South African suppliers, including small, medium and micro enterprises (SMME), funded in a fixed amount of R100 million to be contributed by the merged entity and expended within three years from the effective date of this order. This programme will be administered by the merged entity and advised by a committee established by it, and on which representatives of trade unions business (including SMMEs), and the government will be invited to serve. The merged entity must report back to the Competition Commission annually, within one month of the anniversary of the effective date, about its progress. In addition, the merged entity must establish a training programme to train local South African suppliers on how to do business with the merged entity and with Wal-Mart.

Except for the second condition, these conditions were tendered by the merging parties during the tribunal hearing.

The tribunal issued a press release stating that:

"(t)hese undertakings were made to address certain labour and local procurement concerns raised by intervening parties during the course of the hearing process. The merging parties made it clear that in their view the undertakings were not required legally in order for the merger to be approved, but were offered to meet adverse perceptions about the effect of the merger on the public interest."

The tribunal noted that "the conditions have met some, but not all, the intervenors' expectations of what conditions should be imposed", and indicated that it would explain in its reasons, which will be issued by the end of June 2011, why some of the intervenors' expectations are misplaced.

For further information on this topic please contact Desmond Rudman at Webber Wentzel by telephone (+27 11 530 5000), fax (+27 11 530 5111) or email ([email protected]).