The Competition Commission has given a green light to the merger of Takatso Aviation and national carrier South African Airways SAA with part of the conditions being that Global Aviation and Syranix completely divest from Takatso to limit the lessening and prevention of competition in the domestics airlines market space.
The Competition's decision, which is still to go before the Competition Tribunal for consideration, allows Takatso to acquire 51% of the issued share capital of SAA from the South African government as represented by the Department of Public Enterprises (DPE) while the remaining 49% shareholding in SAA will be retained by the DPE. In a statement, Siyabulela Makunga, Spokesperson for the Commission said the approval first hit a snag on the parties' rejection of the divestiture and employment conditions resulting in the Commission first taking a decision to recommend a prohibition of the merger.
“It was only after the merging parties agreed to the imposition of the remedial conditions initially proposed by the Commission which include divestiture conditions and a moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA that the Commission has now recommended conditional approval of the merger,” Makunga said.
The Commission's concerns were that the merger would result in a substantial lessening and prevention of competition in the domestic passenger airlines market as it would facilitate the exchange of competitively sensitive information between SAA and Lift, through Global Aviation and Syranix having shareholding and the ability to appoint directors to Takato’s board of directors.
Takatso will have access to SAA’s competitively sensitive information by virtue of its majority stake in SAA, a concern is further exacerbated by the fact that the domestic passenger airlines market is highly concentrated, barriers to entry are high and is amenable to coordinated effects.
“To remedy this concern, the Commission and the parties have now agreed to a divestiture condition in terms of which Global Aviation and Syranix will completely divest from Takatso prior to the merger’s implementation,” Makunga said.
Takatso, newly incorporated for the purposes of the merger is a consortium in which Harith General Partners (Harith), holds the majority shareholding.
The minority shareholders in Takatso are Global Aviation and Syranix.
Harith is an asset management firm with investments in infrastructure projects across various sectors.
The Commission said of relevance to this merger assessment is Harith’s investment in Lanseria Airport. Global Aviation leases aircraft and also owns and operates the domestic passenger airline known as ‘Lift’. Syranix co-owns the Lift trademark but does not hold a domestic passenger airline operator’s licence. Syranix provides airlines such as Lift with management support services including commercial, customer support, branding, and associated activities.
“The Commission found that the merger does not raise any other substantial public interest concerns,” Makunga said as the Commission clarified that its recommendation is in an assessment capacity of large mergers and played an advisory role which awaits the Tribunal's final say.
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