Is the Barloworld deal good to go?

Whatever else it achieves, the Barloworld transaction looks set to make history by wending its way through the traditionally sluggish halls of the competition authorities in record time.

And, though the details have not been finalised, the deal has not only been processed speedily – it looks set to be approved without onerous conditions.

Coming so soon after approval of Canal Plus’s acquisition of MultiChoice, the speed at which the Barloworld deal has been processed by both the Competition Commission and the Competition Tribunal has sparked speculation that the authorities are now in a post-Patel merger mindset.  (As minister in charge of the competition authorities between 2009 and 2024, Ebrahim Patel had used his authority to extract – generally very slowly – all manner of “public interest” conditions from merging parties.)

“It’s probably too soon to be certain, but right now it does look as though this could be a good time to be doing mergers, at least from a regulatory perspective,” one competition lawyer told Currency. He was commenting shortly after an unprecedented tribunal hearing into the bid by Newco Consortium to take control of Barloworld.

The hearing kicked off at 4pm on Tuesday and ended shortly before 7pm. Though the details were not finalised during the late evening session, things look to be on track for conditional approval by early next week.

The approval conditions relate to the generally standard ones such as a guarantee of no merger-specific retrenchments for 24 months and trade union involvement in the establishment of an employee share ownership plan (Esop). The Esop will hold 5% of Barloworld once it is delisted.

During the hearing, tribunal panel chair Andreas Wessels made it clear that the trade union representatives would not be allowed to delay the process. He described as “completely impractical” a suggestion by Numsa representative Vivani Shezi that the metalworkers’ union be given a further 60 days to consult on the Esop that had been proposed by the merging parties.

Shezi said the union had only been informed of the Esop a few days earlier. After the initial firm rebuke, Shezi proposed a seven-day adjournment.

Wessels was not persuaded. “That’s a long time; we don’t want to delay this transaction by another seven days,” he told Shezi.

Finally, he instructed Numsa to submit its comments on the Esop issue by Thursday noon, and told the merging parties they must respond by Friday morning.

The delisting question

This means the merger, which was initially filed with the Competition Commission on April 23, looks set to be on track for clearance by the tribunal as early as the end of June. That happens to be a critical date for the merging parties.

The Newco consortium, which has made a R120-a-share offer to buy all the minority shareholders in Barloworld, has said it will decide by June 30 whether or not it will waive the crucial 90% acceptance condition and proceed with the offer.

Approval from the competition authorities should make Newco’s decision considerably easier, as it removes a potential risk of the deal being dragged on for several months.

Though the Esop appeared crucial to the tribunal’s deliberations, at no stage did the tribunal members or the trade union representatives question Newco’s legal team about the status of the Esop if Barloworld is not delisted. Newco has said it will only establish the Esop once the company is delisted.

However, given that UK-based Silchester International Investors, which holds 17.7% of Barloworld, has said it will not accept the R120-a-share offer, it seems inevitable that Barloworld will not be delisted in the near to medium term.

_{Top image: Rawpixel / Currency collages.}