Competition Tribunal approves Heineken-Distell merger

19 May 2023

1. The Competition Tribunal on 9 March 2023 approved the merger between Heineken N.V, the Dutch multinational brewing company (“Heineken”), and South African alcohol producer, Distell Group Holdings Limited (“Distell”).

2. Heineken, through a newly incorporated company, Sunside Acquisitions (Pty) Ltd (“Newco”), will acquire a controlling interest in NBL Investment Holdings Limited (“NIH”) and the flavoured alcoholic beverages, wine, and spirits operations of Distell in South Africa, Namibia and select markets across sub-Saharan Africa.

3. To address competition and other public interest concerns that were raised by the Competition Commission and other interested third parties, the merger was approved by the Competition Tribunal subject to the following –

3.1. to remedy the competition concerns of the proposed merger transaction in the cider market in South Africa, where the merger would have resulted in a consolidation of Heineken’s cider brand Strongbow with Distell’s Savanna and Hunters brands, Heineken must divest of its local Strongbow business and brand by way of a perpetual, royalty-free licence granted by it to an independent licensee, enabling the licensee to exclusively produce, market, distribute and sell the Strongbow brand in South Africa, Botswana, ESwatini, Lesotho, and Namibia. The licensee must have a majority shareholding by historically disadvantaged persons (“HDPs”);

3.2 public interest conditions that promote supplier development, maintain local procurement, encourage investment in research and development and increase local manufacturing capacity. More specifically, Newco –

3.2.1. will spend a cumulative capital expenditure of R10 billion over a period of five years to maintain or grow the aggregate productive capacity of the current proprietary production and manufacturing operations of the merger parties in South Africa;

3.2.2. will invest an amount of R3.8 billion to plan, develop, construct and commission a new greenfield brewery in South Africa within five years of the merger transaction;

3.2.3. will procure that it or suitably qualified and experienced third parties, will invest an amount of R1.7 billion in South Africa to develop, construct and commission a greenfield maltery in South Africa within five years of the merger transaction;

3.2.4. will further maximise the procurement of services and input materials from small and medium-sized businesses (“SMEs”) and HDPs in South Africa.

3.3. the merger parties must establish a new, perpetual employee share ownership plan (“ESOP”) that will provide South African employees with shareholding, voting rights and Board representation for beneficiaries of the ESOP. The ESOP must be structured in accordance with B-BBEE Codes and conditions aimed at promoting Broad-Based Black Economic Empowerment;

3.4. with regard to employment –

3.4.1. the merger parties may not retrench any employees other than the maximum number of 166 combined employees of Heineken SA and Distell;

3.4.2. the potential maximum number of retrenchments can only involve employees who are above Heineken SA’s employment grade level 9 and Distell’s Paterson employee grade level C3. No unskilled workers or employees of the merger parties whose roles involve working on production lines within the production operations (including machine technicians) may be retrenched as a result of the merger transaction;

3.4.3. Newco must maintain the total aggregate number of all employees of the merger parties in South Africa, as at the merger approval date, for 5 years after the merger transaction;

3.4.4. Newco will adopt a policy of paying fair wages to its employees and those of its subsidiaries and will conduct an internal assessment to ensure no employees are paid below the Newco fair wage level. Newco will also work with outside service providers that supply employment services to it, to ensure that the outside service providers meet their obligations of paying their employees a fair, living wage in South Africa,

3.5. conditions to address allegations of human rights abuses including an investigation of working conditions on the affected farms and commitments to human rights standards for workers and employees.

The order of the Competition Tribunal and the conditions can be accessed here:

Download Document.

Article sourced from Gildenhuys Malatji Incorporated.

See also:

• Commission welcomes Tribunal’s approval of Heineken and Distell merger
• Merger control
• Mergers and acquisitions lawyers: Why they are important for success
• Final Guidelines on the Exchange of Competitively Sensitive Information has been published

(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)