News24 | Watchdog accuses Premier of hiding Tulbagh closure plans, wants RFG deal scrapped

In July, Premier confirmed that it planned to close RFG’s canning factory in Tulbagh (pictured). Some 246 permanent employees and up to 2 200 contract and seasonal employees could be affected.

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• The Competition Commission has asked the Competition Tribunal to reverse Premier Group’s more than R6 billion takeover of RFG. It says the two parties withheld crucial information about the planned closure of the Tulbagh canning business.
• This follows an investigation by the Competition Commission after the South African Clothing and Textile Workers Union complained, saying the closure would result in job losses. This, it argued, breached conditions imposed by the Competition Tribunal that protected employment in the merger.
• In July, Premier confirmed that some 246 permanent employees and up to 2 200 contract and seasonal employees could be affected.
• For more financial news, visit News24 Business. 

The Competition Commission wants to unwind Premier’s R6bn RFG takeover, claiming the parties hid plans to close the Tulbagh canning business.

The commission’s application to the Competition Tribunal follows its investigation after a complaint lodged by, among others, the South African Clothing and Textile Workers Union, which argued the planned closure of the Tulbagh business would result in retrenchments in breach of the merger conditions.

Premier was given the go-ahead in March to buy RFG (formerly Rhodes Food Group), subject to conditions that included employment protections. RFG owns the canned foods brand Rhodes, as well as Bull Brand and Pakco condiments. Premier owns brands like Blue Ribbon bread and Snowflake flour.

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In July, Premier confirmed that it planned to close RFG’s Fruit Products Western Cape (FPWC) canning business in Tulbagh.

The R1 billion business had for some time “faced significant and worsening challenges to its economic sustainability”, it said. Some 246 permanent employees and up to 2 200 contract and seasonal employees could be affected.

The commission said that before the merger, which was first announced in October last year, was referred to the tribunal, Premier and RFG had stated they “did not contemplate closing nor disposing of any manufacturing facilities or production lines, or equipment after the merger”.

The two also repeated this assurance before the tribunal approved the transaction, confirming they did not contemplate closing, integrating or consolidating their respective production facilities, it said.

After receiving the complaint, the commission investigated and found that Premier and RFG had failed to disclose information about the planned closure to the commission and the tribunal.

This it added was despite the parties “having known and discussed the option to do so before the tribunal approved the merger”.

“This information was material to the commission’s assessment, particularly because the commission had expressly requested confirmation of the parties’ post-merger plans for the closure, integration or consolidation of their production facilities.”

This non-disclosure denied both the commission and the tribunal the “opportunity to assess and address the closure’s competition and public interest implications before approving the merger”.

It added that “withholding material information, whether by omission or as a deliberate act” undermined the integrity of the merger-control regime and “may result in the revocation of an approved merger”.

“The integrity of South Africa’s merger-control regime depends on merger parties making full, frank and honest disclosure of all material information. The Commission cannot properly assess the competition and public-interest consequences of a transaction when crucial facts are withheld,” said Competition Commissioner Doris Tshepe.

“Where parties fail to meet this obligation, the Commission will not hesitate to take appropriate action to protect the integrity of the regulatory process.”

Premier said it would react to the commission’s announcement later on on Wednesday.