Competition Commission recommends approval of Premier–RFG merger with conditions

Premier Group's share price gained slightly by 0.4% to R181.97 on Thursday after the Competition Commission recommended that the Tribunal approve its proposed acquisition of food producer RFG Holdings, subject to public-interest conditions aimed at protecting jobs and supporting small businesses.

The recommendation was made following the Commission’s ordinary meeting held on Monday.

The proposed transaction to acquire all of RFG’s shares is structured in a ratio of one Premier share for seven RFG shares, and is based on a RFG Holdings price per share of R22, and a reference price of R154 per share.

If implemented, RFG shareholders will hold a 22.5% stake in the combined group, and the listing of RFG shares will be terminated on the JSE.

Premier is a major player in the manufacturing, distribution and marketing of branded and private-label fast-moving consumer goods (FMCG) in South Africa and across the Southern African region.

The group’s extensive brand portfolio includes well-known household names such as Blue Ribbon, Iwisa No. 1, Mister Bread, Manhattan, Snowflake, Champion, Lil-Lets and Dove Cotton, among others.

Its operations span milling and baking, sugar-based confectionery, animal feeds, and home and personal care products. Premier operates bakeries, mills and manufacturing facilities, supported by 28 distribution depots located across South Africa, Eswatini, Mozambique and Lesotho.

In October, the companies announced in a joint statement that Premier planned to acquire RFG in a share swap transaction.

RFG focuses on the manufacture of convenience meal solutions, including pies, dairy products, fruit juices and purees, long-life and canned foods, as well as baby food products. Its brand stable includes Rhodes Quality, Bull Brand, Squish, Magpie, Big Jack, Man’s Meal, Mama’s Pies, Today, Hinds, Pakco and Bisto.

RFG operates production facilities in South Africa and Eswatini and exports its products to several international markets, including the United States, Canada, the United Kingdom, Europe and the Middle East.

After assessing the transaction, the Commission concluded that the proposed acquisition is unlikely to substantially prevent or lessen competition in any relevant market.

The Commission found limited overlap between the activities of Premier and RFG and determined that the transaction would not materially alter market dynamics or harm consumers.

However, the Commission identified potential public-interest concerns, particularly relating to employment. To address these concerns, the merger parties have undertaken not to retrench any employees as a result of the merger for a period of three years from the implementation date.

In addition, Premier has committed to increasing the combined group’s annual spend on enterprise and supplier development initiatives over the same three-year period, a move the Commission says will support small and medium-sized businesses and promote inclusive economic growth.

The final decision now rests with the Competition Tribunal, which will consider the Commission’s recommendation and the proposed conditions before issuing its ruling.

The two companies percieve this transation to represent a complementary addition to the Premier portfolio - while the two share common customers and sales channels, there is no overlap of operations in terms of the products and categories they operate in.

RFG’s “diversified and well-balanced offerings align strategically with Premier's existing product base and broaden Premier's category reach and market presence,” the companies’ directors said at the time of the initial announcement.

They said the transaction was an opportunity for RFG’s and Premier's shareholders to participate in the future growth of the combined group, which would have a combined annual revenue of R27.9 billion and taxed profit of R1.7bn, representing significantly increased scale of operations.

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