"Choppies Offer Was Sweetest For Supasave, Botswana
Mmegi.bw - Jun 24th, 11:21
The Competition Authority has revealed that Choppies was one of three suitors lined up to acquire 15-year-old retail group, SupaSave, winning the deal due to the superiority of its offer on the table.
The Authority revealed this when announcing its conditional approval of the multi-million Pula deal which will see Choppies' boost its mass grocery retail market share beyond 30 percent. Under the deal, Choppies SupaSave will take over SupaSave's six stores located in Gaborone, Molepolole and Palapye as well as its distribution wing, MegaSave.
Acting Competition Authority CEO, Magdeline Gabaraane, revealed that the smaller retail chain had been struggling from about 2011 and had put itself up for acquisition."SupaSave since 2011 ran into financial distress and had a situation where their assets could not cover their liabilities," she said."They then tried to find buyers and there were three bidders, including Choppies, whom they felt had a better deal. The transaction then came to the Authority for consideration."
Authority executives could neither identify the other two suitors nor the value of the approved deal, citing a Competition Act confidentiality clause invoked by the participating parties. However, the local market consists of groups targeting low and high end consumer goods such as Shoppers, Spar and Payless franchises, Lucky 7 supermarkets, Shoprite, Pick n' Pay and Woolworths. Game Stores has also recently expanded into consumer goods at its Gaborone branch.
Gabaraane said the fact that SupaSave had been in distress played a role in Choppies' proposal sailing over the public benefit/interest criteria of the application. The other two criteria are concerned with whether the transaction would have lessened or prevented competition in the market or whether Choppies would have acquired a dominant market position."If SupaSave had not received any rescuers, it would fail together with the 300 or so workers it employs and we took this into account," she said. "The options available to the Authority's committee were to reject completely, approve with conditions or approve totally.
"We considered these three and saw that if we totally rejected, there would be the possibility of SupaSave's liquidation."This could mean if Choppies wanted the retail space, it could go and talk to landlords but if it took this route; jobs would not be safeguarded."Observers had expected the other two criteria; lessening of competition and acquisition of dominant market, to play a major role in the Authority's consideration, particularly as the deal would take Choppies beyond the 25 percent market share trigger in the Competition Act. The acting CEO said the Authority held consultations with potential competitors and customers, conducted its own study and also received public feedback, indicating that there were no substantial anti-competition threats from the deal.
"We saw that there would be the removal of a competitor, but then we looked at the locations where Choppies and SupaSave both operate and asked what would happen to customers' choice after the transaction," she said. "With our analysis and after interviewing customers, we saw that there were still South African chain stores, sometimes within walking distance, that these customers had the option of. Consumer harm by way of Choppies increasing its prices was not a significant risk."The Authority said the risk that Choppies could abuse its dominant market position was curbed by the presence of other chain stores.
Under the CA's conditional approval, Choppies should within five years provide the Authority with an exit plan to divest from the areas where its business intersects with SupaSave stores.This is in order to allow other competitors into the locations. In addition, Choppies is required to retain all former SupaSave employees at the same terms and conditions. Choppies and SupaSave outlets interests are in Mogoditshane, Broadhurst Extenson 16, Gaborone Bus Rank/Gaborone West and in Palapye.
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