SABMiller, Coca-Cola agree concessions with S African government to win approval for bottling deal
04 May 2016
SABMiller and Coca-Cola have agreed to concessions with the South African government to win approval for a deal to combine their soft-drink operations, the companies said today.
Under the concessions agreed with the South African Ministry of Economic Development, the companies agreed to a three-year freeze on layoffs and agreed to invest 800 million rand ($54 million) in two funds of 400 million rand ($27 million) to support small South African businesses.
SABMiller had agreed to a tie-up with Coca-Cola in November 2014, to create Africa's largest soft drinks bottler, Coca Cola Beverages Africa (See: SABMiller Plc, Coca-Cola to merge soft drinks bottling operations in Africa ).
SaBMiller is currently in the process of being taken over by its larger rival Anheuser-Busch InBev.
The business with annual sales of $2.9 billion would focus on the fast-growing market on the continent.
The all-equity deal received a preliminary approval in December from South Africa's Competition Commission, which set several conditions including Coca-Cola Beverages Africa limiting jobs cuts to 250 and making sure it bought cans, glass, sugar and crates from local suppliers.
The Commission looks into deals for antitrust issues and recommends remedies to the Competition Tribunal, which makes a final ruling. A Tribunal hearing on the proposed deal is set to start next Monday.
The approval of deals follows a time consuming process in South Africa, partly due to the public interest mandate of regulators to safeguard jobs in addition to anti-trust mandate to protect competition.
"I am very happy that we have reached this agreement and hope we now have a clear path to the conclusion of this transaction," said SABMiller chief executive officer Alan Clark, Reuters reported.
The proposed merged entity would maintain permanent employment at current levels for a period of three years, SABMiller said in a statement today.
According to the company, one of the funds would be invested in agriculture development and the second to develop retailers owned by people discriminated against during apartheid.
''The agreement between the merger parties and the South African government is expected to expedite the approval process,'' SABMiller said.