ZCC authorises Illovo Sugar to buy Nanga Farms shares

ZCC authorises Illovo Sugar to buy Nanga Farms shares
Written by Nchima Nchito Jr
Saturday, June 13, 2009 3:22:05 PM

ZAMBIA Competition Commission (ZCC) board of commissioners has granted a conditional final authorisation for the proposed acquisition of 85.7 per cent shares in Nanga Farms Plc by Illovo Sugar.

ZCC executive director Thula Kaira stated in a press release that the board at a special meeting held on June 10, 2009 determined that the authorisation was the right course to take in the absence of alternative buyers for Nanga Farms.

“While the advantages for Zambia Sugar Plc to control Nanga Farms were self-evident, the board were of the view that the proposed acquisition of 85.73 per cent shares in Nanga Farms Plc to Illovo Sugar (Zambia) Limited/Zambia Sugar Plc was likely to adversely affect competition in the relevant markets for sugar cane and sugar, in which markets Zambia Sugar held dominant positions of market power,” he stated

“The transaction was thus to further enhance Zambia Sugar’s market power through the absolute control of the raw material supply source at Nanga Farms. The Board also noted the absence of import competition for sugar cane and the fact that the withdrawal of Zambeef Plc from Nanga Farms robbed the market of a possible future independent sugar mill competitor to Zambia Sugar Plc, which sugar mill was expected to take advantage of the Nanga Farms sugar cane source.”

Kaira, however, noted that while the commission was alive to the fact that while granting an authorisation would entrench Zambia Sugar Plc’s monopoly control of the sugar industry in Zambia, there had on the other hand not been any alternative offer to the purchase of the shares and the Commission could not unduly stop an exiting shareholder from divesting their interest.

Kaira added that in light of the foregoing, the commission resolved to grant authorisation subject to several conditions.

“Zambia Sugar Plc or any of its affiliate companies shall not enter into any agreements with any domestic or foreign business or government, which agreement prevents, restricts or distorts competition in the sugar or related sectors in Zambia,” he stated “Zambia Sugar Plc or its affiliate companies shall not prevent, restrict or distort other would be investors in the sugar industry from engaging in sugar cane supply contracts with any independent sugar cane growers in Zambia.”

He stated that in addition, Zambia Sugar Plc or its affiliate companies was not expected to engage in abuse of dominant position of market power including, but not limited to, excessive pricing of sugar in the local market.

Kaira stated that Zambia Sugar Plc or its affiliate companies was expected to sign a compliance agreement with ZCC to finalise the authorisation process and show how the company intended to ensure compliance with the conditions of the authorisation.