The South African Competition Tribunal received notice of, heard and approved the acquisition by construction firm, Stefanutti Stocks (Pty) Ltd, of Energotec, which is a division of First Strut (Pty) Ltd, and approved the merger within four hours of receiving the Competition Commission’s recommendation.
The Tribunal approved the deal on the basis that Energotec, and ultimately First Strut, are in a precarious financial condition (under liquidation). The parties explained to the Commission and Tribunal that If the merger had not been approved the 667 staff employed by Energotec would have lost their jobs. The parties also relied on the failing firm jusitfication. As a condition for the approval of the merger however the Tribunal ordered that, for a period of 2 years from the date the merger is implemented, Stefanutti Stocks must limit retrenchments resulting from the merger to 16 employees. This type of public interest condition has become common in South Africa.
It was stated by the parties that the deal will enable the acquirier to offer a more comprehensive service to its clients, making this an attractive opportunity for the construction firm.
The Competition Commission had concluded that the merger was unlikely to cause a substantial lessening of competition. The only customer affected by the transaction, Sasol, had provided support for the deal.
The matter provides useful precedent for future failing firm merger cases.