Genesis assists merging parties in R62-billion retail deal

Genesis was commissioned to assist Pepkor Holdings and Steinhoff International Holdings with their submissions to the Competition Commission during its investigation into their proposed R 62.8-billion merger - the largest corporate transaction in South Africa at the time.

The commission was primarily concerned that the increased partial shareholding in Steinhoff by Titan Group, which would result from the transaction, could potentially result in either unilateral or coordinated anticompetitive effects due to the fact that Titan also held an indirect economic interest in Shoprite Holdings.

Genesis assisted the merging parties by conducting an economic assessment that considered whether such an indirect economic interest had the potential to affect the nature of competition between certain businesses in the Shoprite and Steinhoff groups.

This required an in-depth understanding of the economic theory regarding the competitive effects of partial ownership, as well as an understanding of the conditions under which the ability and incentive for a firm such as Titan to engage in such conduct would be likely to exist.

The project team’s analysis was key to outlining what these conditions would be, as well as to addressing why they were not satisfied in this case. This primary analysis was supported by an analysis of the competitive dynamics of the markets in which such effects are most likely occur.

The Genesis report on the matter was ultimately accepted by the commission, which subsequently recommended that the proposed transaction be approved.

The Competition Tribunal agreed with the commission’s recommendations and approved the merger without conditions.