Africa’s largest grocery retailer Shoprite has received the greenlight from the Competition Tribunal to continue with its acquisition of several Massmart-owned stores, although this excludes 10 grocery stores under the Cambridge and Rhino Cash and Carry brands which the tribunal has identified as “highly problematic”.
In the deal, Shoprite will acquire 42 Cambridge Food and Rhino Cash and Carry stores – the majority of which will include adjacent liquor stores – two Fruitspot facilities, the Massfresh Meat business and 12 Masscash Cash and Carry stores.
Excluded from the deal however are Massmart’s Cambridge Botshabelo; Cambridge Thaba Nchu; Cambridge Nkandla; Cambridge Ladybrand; Cambridge Mitchell’s Plain; Rhino Qumbu; Cambridge Nongoma; Cambridge/Savemoor Tembisa; Rhino Ulundi; and Cambridge Evaton. These are stores that the competition authorities have identified as stores that need to be divested separately by Massmart.
“After considering the Commission’s recommendation and the submissions of the participating parties, the Tribunal ultimately approved the proposed merger on the basis that the ten highly problematic stores must be divested by Massmart to a suitable purchaser/s within a specified period from the Tribunal’s approval of the merger (the divestiture period),” the Tribunal said in a statement released on Friday.
“The purchaser/s must be an independent third party/ies unrelated to Shoprite; must be a small- or medium-sized business/es (SMME) and/or historically disadvantaged person/s (HDPs); and must possess the necessary financial resources, proven technical expertise and incentive to develop the highly problematic stores as viable and competitive in the relevant geographic areas.”
Massmart first announced its plans to sell its lower-profile Cambridge Food, Rhino and Massfresh business in March 2021, the sale of the businesses, according to Massmart, was due to the brands’ poor-performances.
Since this announcement, Massmart – which owns Makro, Game and Builders Warehouse stores – has battled several other performance challenges. The last year has seen Massmart delist from the JSE, with owner Walmart taking the group back under its umbrella and operating the company as a private entity – in an attempt to salvage whatever is left of the company and hopefully return it to profit.
Shoprite competitors Pick n Pay and Spar, which acted as intervenors during the tribunal’s three-day merger hearing, argued for the prohibition of the merger according to the Tribunal.
Public interest concerns
Forming part of the competition authoritity’s strict conditions for approving the merger are several public interest-focused conditions relating to employment, equitable ownership, support of local small businesses and skills development.
With regard to jobs, Shoprite will be expected to absorb all of the employees of the stores it will be acquiring from Massmart. Further, the retailer will be required to create additional permanent employment at its local operations.
To support greater spread of ownership, Shoprite will have to establish and implement an Employment Share Ownership Programme (ESOP) within 60 days of the merger implementation date.
“The ESOP will hold 40 million shares in Shoprite and employees’ participation will be by way of holding units, at no cost. Among others, employees will be required to have been employed by the Shoprite Group for a minimum specified period before being eligible to join the ESOP.”
For skills development, Shoprite will undertake to enrol students in its SMMEs mentorship programme and the Government’s YES programme.
“The Shoprite Group will also contribute a minimum specified amount to the Shoprite Academy annually, to enhance internal training and skills development within the Shoprite Group.”