CCA clears Bolux’s Pie City manufacturing takeover with competition and job safeguards

The Competition and Consumer Authority has approved Bolux Group's acquisition of Pie City's manufacturing assets, clearing the way for Bolux to assume production previously undertaken by the pie manufacturer, but subjecting the transaction to conditions aimed at protecting jobs, smaller bakeries and competition in the retail supply chain.

The approval does not amount to a takeover of Pie City itself. Bolux is acquiring specified movable manufacturing assets, plant and equipment owned by Pie City and Brangus Botswana at Plot 62, Gaborone International Commerce Park, while Pie City will continue operating independently, primarily on the retail side of its business.

However, the transaction will significantly change the companies' roles in the pie supply chain. The CCA says Pie City intends to cease manufacturing, with Bolux assuming the manufacturing activities previously undertaken by the company under a post-transaction licensing and contract manufacturing arrangement.

This aspect of the proposed transaction is the reason the authority attached employment conditions to its approval.

Bolux will be required to do all in its power to ensure that the transaction does not result in merger-specific retrenchments, including employing and redeploying employees of Pie City involved in the manufacturing process. Before implementation, it must also demonstrate to the CCA how the transaction will contribute to employment creation.

The authority has also placed limits on what Bolux can do with the manufacturing plant and equipment. The new plant and equipment must be used solely to produce frozen pies and related pastry products. Bolux will not be permitted to repurpose the assets for the manufacture of bread loaves, buns, rolls and other traditional bakery products in which small and medium-sized bakeries are active participants in Botswana's domestic market.

CCA has also prohibited Bolux and Pie City from entering into exclusive supply or exclusive distribution arrangements arising from the transaction. The authority says it recognizes that the post-transaction relationship could create opportunities for restrictive business arrangements that disadvantage other players in the retail segment.

"With Bolux being a significant player in the upstream market, the authority is mandated to monitor its competitive behavior to guard against exclusive arrangements as any abuse of dominance," CCA said.

Bolux is already a major food manufacturer with operations spanning maize and wheat milling and the production of products including A1 Super Maize Meal, A1 Instant Porridge, Snowwhite Flour, Maxi Bread, GO Bread, Chobe Maize Rice, Samp and Chobe Super Special Maize Meal. Its principal manufacturing plant is in Ramotswa , with depots in Palapye, Francistown and Maun.

Pie City, meanwhile, is licensed to manufacture and retail confectionery pies, pizzas, fruit juices and related products. Brangus Botswana, whose property at Plot 62 is involved in the transaction, is a property holding company and does not engage in trading activities.

The CCA's assessment was that the transaction would not create an increase in market concentration and substantially lessen competition because Bolux is not acquiring a shareholding in Pie City. The authority also noted that the manufacturing assets being acquired had never been used in the relevant market and that Pie City's manufacturing has largely been for internal supply to its own retail outlets.

The authority nevertheless identified potential public benefits from the transaction, including employment creation, wider product lines and economies of scale. These, it said, could ultimately benefit consumers through lower prices, improved product quality and greater innovation in production.

The approval is also subject to the statutory citizen-reservation framework. The CCA said the merger falls within a market reserved for citizens and requires the enterprise, before implementing any activity requiring a license under the framework, to obtain the required approvals, licenses and authorizations from the Ministry of Trade and Entrepreneurship.