SAA/Takatso merger gets nod from watchdog

The controversial SAA deal with Takatso Aviation moved a step closer to finality when the Competition Commission on Friday recommended that the Competition Tribunal give the deal a green light depending on the disposition of subsidiary business interests and employment conditions.

Competition Commission spokesperson Siyabulela Makunga said the recommendation followed the commission’s investigation into the large merger notification received on June 3 last year.

Takatso, a private consortium, intended to acquire 51% of SAA’s issued share capital from the government represented by the Department of Public Enterprises under minister Pravin Gordhan.

The approval comes after a back-and-forth fight between Gordhan and his suspended DG Kgathatso Tlhakudi regarding the sale of SAA for R51 to Takatso.

Tlhakudi accused Gordhan of being the hidden hand behind Takatso’s formation and devaluing the national carrier to push the deal through on a dime. Gordhan denied the allegation.

The commission’s decision comes two months after parliament’s public enterprises portfolio committee obtained legal opinion to investigate Gordhan for “serious allegations of misconduct” in connection with the deal.

Once final, the public enterprises department would keep a 49% stake in the national airline, while 51% would be owned by Takatso.

Both parties agreed to a divestiture condition on two terms, in which Global Aviation and Syranix will completely divest from Takatso prior to the merger’s implementation.

Makunga said that the commission considered that this “fix-it-first” remedy was appropriate in the circumstances, given the extent of the competition concerns identified.

He said the divestiture and employment conditions were initially rejected by the parties resulting in the commission first recommending a prohibition of the merger.

“It was only after the merging parties agreed to the imposition of the remedial conditions initially proposed by the commission, which include divestiture conditions and a moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA, that the commission has now recommended conditional approval of the merger,” he said.

Takatso is a consortium in which Harith General Partners holds the majority shareholding, while the minority shareholders are Global Aviation Operations and Syranix.

Makunga said the commission found that the merger was likely to result in a substantial lessening and prevention of competition in the domestic passenger airlines market.

He said this was likely to facilitate the exchange of competitively sensitive information between SAA and Lift. This was through Global Aviation and Syranix having shareholdings and the ability to appoint directors to Takatso’s board.

Takatso would have access to SAA’s competitively sensitive information by virtue of its majority stake in SAA, pursuant to the proposed merger.

“This concern is further exacerbated by the fact that the domestic passenger airlines market is highly concentrated, barriers to entry are high, and is amendable to coordinated effects,” he said.

Makunga said the commission had found that Harith’s investment in Lanseria was unlikely to raise vertical concerns. This was because of factors such as recent investments to expand and improve Lanseria Airport and the availability of Johannesburg OR Tambo International Airport as an alternative to Lanseria, among others.

He said the commission found the merger did not raise other substantial public interest concerns. The commission, therefore, recommended that the tribunal approve the merger subject to the prescribed conditions.

The commission noted that its role in large merger assessments was advisory in nature. Therefore, the recommendation was referred to the tribunal for a final decision, Makunga said.

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