Agro firms turn to mergers for survival

Pannar+Seed

Brighton Gumbo, Business Reporter
SIXTEEN mergers were approved by the Competition and Tariff Commission last year as companies continue to consolidate their balance sheets.
In 2014, the CTC approved seven mergers.

Following the adoption of a multicurrency system in February 2009, the economy has largely been choked by a tight liquidity situation which among others has seen local companies struggling to improve their competitiveness.

The tight liquidity situation has also been worsened by the high cost of funding by financiers, which to some extent has seen distressed companies failing to emerge from the woods.

Most of the mergers approved last year were largely in the agricultural and agro-processing industry.

The mergers included deals between Olivine Industries and Wilma, Prime Seeds and SeedCo, Pioneer Seeds and Pannar seeds, Continental Outdoor and JCDecaux South Africa among others.

CTC assistant director Benjamin Chinhengo said the mergers were driven by the desire to strengthen operations by companies so as to ease economic challenges.

He said the mergers that involved local companies with South African firms were spurred by that country’s businesses’ need to get easy access to the United States dollar.

“Since the economy isn’t liquid, most firms resorted to merging and acquisitions so as to get funds for recapitalisation and replace their ageing machinery to boost their operations,” said Chinhengo.

In 2015, he said, the commission handled about four mergers for the Common Market for Eastern and Southern Africa (Comesa) region.

Chinhengo said since the beginning of the year, CTC had been notified of five mergers which include National Foods and Pure Oil, Takura and Cairns Foods, Food Lovers Market and Actis, a South African company.

“We’ve never received such a number of mergers in the first quarter; over the years during the same period, we’ve received less than five and during the period under review in the previous year, we had one or two,” he said.

“As long as the economy remains depressed throughout the year, we anticipate seeing more mergers coming on board.”

The CTC seeks to protect markets from monopolies and also to ensure that fair competition prevails on the market.

It was established in 1998 and by September 2010, the commission had handled over 1,000 competition cases with 53 percent involving restrictive and unfair business practices and 47 percent being mergers and acquisitions.

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