Competition body says OK to Shoprite
COMPETITION Board clearance should pave the way for a speedy conclusion to Shoprite Checkers' acquisition of OK Bazaars in its entirety, quashing earlier speculation that it will hand-pick about 50 stores.
On Friday Competition Board chairman Pierre Brooks said he had given his blessing for a takeover of all OK's stores. "We believe they have not finalised negotiations on financial issues but we have indicated we will not oppose the deal", he said.
OK has 144 stores and 20 Hyperamas which collectively brought in R6.4-billion in sales in the year to March. But the company's bottom line losses mounted to R74-million from a R1-million loss in the previous year.
The OK's net asset value was R950-million at end-March, and there is speculation that the asking price for OK was R400-million, less R100-million of debt.
Six years ago Shoprite, then a relatively small, Cape-based retail chain, bought 169-store Checkers for a song, and has turned it around to such an extent that its operating profit is now around R200-million.
It is estimated that Shoprite Checkers holds between 23% and 24% of the food retail market, while the OK Bazaars has 17% to 18%, giving them a combined market share of more than 40%.
But the board has indicated that a merger will not be uncompetitive.
Brooks said that an analysis of the proposed merger, which followed an approach to the board by the parties involved, indicated there was no cause for concern.
He said the decision was based partly on the fact that OK Bazaars "is an ailing company, and people have known for a long time that they are going out of business in any event."
The transaction could benefit the trade unions that are involved, and contribute to black economic empowerment.
"We looked purely and simply at competition issues and looked at various categories including where consumers are and where they buy," Brooks said.
"We usually look at concentration ratios, and while they can never be decisive, they are at levels which do not warrant intervention."
Manufacturers of products sold in supermarkets were canvassed on the situation.
Brooks said it was important to establish whether the company's combined purchasing power would enable it to "be coercive in its dealings with suppliers".
It had been established that this was not the case.
Brooks said he was aware that other parties were also interested in the whole or part of OK Bazaars.
A spokesman for Shoprite's managing director, Whitey Basson, said he would not comment on the deal as a cautionary notice was still in place.
It is not clear when the deal will be announced.