LIVINGSTONE MARUFU
The Competition and Tariffs Commission (CTC) has revealed it handled 12 merger transactions in the last quarter of 2021 as companies combine forces to have scale.
Out of this, six were approved.
The mergers were between local and continental companies thereby hedging the companies against headwinds of the firms’ respective country.
“12 merger notifications were received during the last quarter of 2021 with six merger transactions finalised in Q4 and approved without conditions,” CTC said in its latest bulletin.
CTC said some transaction were done under the COMESA Competition Commission jurisdiction especially transaction merger involving 100% acquisition of the share capital of Alex Medical Investment Limited by Tana Africa Capital II Limited for the establishment of full function greenfield joint venture in Kenya and Uganda by Nutreco International B.V. and each of Unga Farm Care E.A. Limited and Unga Millers (Uganda) Limited.
CTC also received a merger notification of the 100% acquisition of Adapt IT Holdings Limited by Volaris Group Inc of Canada.
Volaris in this instance acquired direct controlling interest in the business of Adapt IT.
Volaris is incorporated in terms of Canadian laws and does not have a physical presence in Zimbabwe, though it derives revenue through selling software to Zimbabwe.
Adapt IT is incorporated under the laws of South Africa and is a specialized software business solutions provider.
CTC investigation revealed that the transaction between Volaris and Adapt IT was less likely to alter market structure in Zimbabwe because the merging parties are not present in Zimbabwe.
Post-merger the parties will be having a 2% of the market share implying that they will not be able to independently raise price thereby dismissing unilateral effects.
Furthermore, post-merger the market concentration would increase by 2 points from an HHI of 1476 to 1478 thereby the market will remain unconcentrated.
With the structure remaining the same the firm’s conduct is likely to remain the same and it is unlikely that coordination will take place in the market thereby dismissing coordinated effects.
“The relevant market in this transaction was mostly dominated by foreign software companies as the consumption of locally developed software is low. Given the nature of the relevant market, import competition is rife and any desire by the merged entity to operate anti-competitively will result in a switch to other software developers around the world,” CTC said.
