This ends the litigated and contentious merger proceedings commenced with its notification to the Competition Commission (Commission) in December, 2006. In the five years since the Commission's unconditional approval of the merger:
The abandonment of a fully implemented merger is probably a first in South Africa since the Competition Act came into service in the late 1990s. The merger control regime under the Competition Act is one designed to prevent the joining of firms until completed scrutiny by the competition authorities. The reason for the prior approval process is that it is mostly difficult to unwind an integrated business, to restore two independent businesses as well as the state of competition before implementation. Integration of a target entity into another firm may mean that jobs are lost, systems integrated and the entire strategy and business model aligned with the ideas of the acquiring group. It is better to let the merger parties wait and to maintain existing competition until the merger's probable impact on competition has been investigated and vetted. If the merger is then prohibited or if the conditions imposed are unacceptable, the parties can just step away from the deal, business continue uninterrupted and the state of competition preserved.
Giving back Boskor sawmill to the sellers may seem like an easy step to take, but restoration of the parties' position to which they were pre-merger, may prove to be difficult after the significant lapse of time since implementation in 2007. This could conceivably involve, for example, compensation for value added to the mill, re-staffing of positions rationalised pursuant to the merger and renegotiating of commercial deals between the target and the acquirer.
In this particular case, the merger parties were fully entitled to implement their transaction in 2007 as the Commission had approved their merger at the time. The events subsequent to implementation were initiated by a competitor aggrieved by the approval. Interference by interested parties and competitors are not unusual in merger proceedings, but not many involved mergers already implemented. The contentious amalgamation involving Stellenbosch Farmers' Winery and Distillers in the early 2000s was tackled by a smaller competitor and resulted in contested merger proceedings well after the actual integration of the two firms. The subsequent conditional approval of that merger by the Tribunal was acceptable to the merger parties and their combination could remain in place.
In the forestry merger, the abandonment of the deal half a decade after its implementation must mean that the integrated MTO/ Boskor prefers the burden of undoing their union, to the prospect of a continuing battle before the competition authorities and possibly again before the CAC, without in due course necessarily achieving an unconditional approval that originally gave them the green light to integrate.
Several mergers have been litigated over significant time instigated and fuelled by opponents, but ultimately successfully from the merger parties' perspective, for example, most recently Pannar/Pioneer Hybrid Seeds, Media 24/Paarl Cold Set, and the Walmart/Massmart mergers. However, one must question whether the current merger procedure under the Competition Act is well suited to the purpose of evaluating and processing competition and public interest issues expeditiously when there is opposition.
