Approval of PepsiCo’s acquisition of Pioneer Foods explained

The Competition Tribunal (CompTrib) recently published a comprehensive report detailing why it had approved PepsiCo’s approximately US$1,7 billion (about R28 billion) acquisition of Pioneer Foods.

Approval of PepsiCo’s acquisition of Pioneer Foods explained
The Competition Tribunal is reportedly satisfied that expanded ownership and shareholding in Pioneer Foods by black citizens will be well-served through the company’s acquisition by PepsiCo’s subsidiary, Simba.
Photo: Pioneer Foods

The Competition Tribunal (CompTrib) recently published a comprehensive report detailing why it had approved PepsiCo’s approximately US$1,7 billion (about R28 billion) acquisition of Pioneer Foods.

The acquisition, made via PepsiCo’s South African subsidiary, Simba, had generated significant public interest with regard to the merged entities’ possible impact on job losses and Broad-Based Black Economic Empowerment (BBBEE).

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According to the report, this included questions and concerns from the minister of Trade, Industry and Competition, Ebrahim Patel and the Food and Allied Workers’ Union (FAWU).

Patel’s primary concerns were reportedly the comparative levels of shareholding in the company by “black entities” both before and after the acquisition; the extent of representation by Pioneer Foods’ shareholding workers on the company’s board of directors; and in which entity shares already held in Pioneer Foods’ by the company’s workers would be held following the acquisition by Simba.

In addition, according to the report, one of FAWU’s key requests was to be allowed to engage with the merged entity on matters pertaining to worker representation on the board of trustees of a broad-based workers’ trust to be formed to hold R1,6 billion of PepsiCo common stock given to the merged entity’s workers.

“This holding will be unencumbered and will allow for immediately realisable dividends. The stock in PepsiCo must, after five years, be converted into a direct shareholding in Pioneer of up to 13%,” a Pioneer Foods statement said.

This statement added that “there will be no merger-related retrenchments for a period of five years.

Among others, PepsiCo has committed to grow, over a period of five years, the operations of the merged company, and to create 500 direct and 2 500 indirect employment opportunities in South Africa.”

The statement added that these entities had committed to supporting expanded local food production, and the sourcing of agricultural ingredients therefore, through introducing PepsiCo’s Food Innovation Valleys (FIV) concept to South Africa.

“[The FIV concept] seeks to be a catalyst for sustainable growth in the agriculture and food supply chain; focuses on innovation in order to develop sustainable, resource-efficient and trusted food systems; [and] bringing together various stakeholders, including government, academics and industry. The merging parties have also made several local procurement commitments,” Pioneer Foods’ statement explained.

The CompTrib’s report said that in its evaluation of the acquisition’s public interest issues, it was satisfied with the agreements reached between Patel, FAWU, Simba and Pioneer Foods on matters related to furthering equitable participation in South Africa’s economy, as well as with concerns of possible lessened market competition as a result of the merger between Simba and Pioneer Foods.

Lloyd Phillips joined Farmer’s Weekly in January 2003 and is now a Senior Journalist with the publication. He spent most of his childhood on a Zululand sugarcane farm where he learned to speak fluent Zulu. After matriculating in 1993, Lloyd dreamed of working as a nature conservationist. Life’s vagaries, however, had different plans for him and Lloyd ended up sampling various jobs in South African agriculture before becoming a proud member of the Farmer’s Weekly team. Lloyd still thoroughly enjoys learning and writing about all aspects of national and international agriculture. He lives in Mooi River, KwaZulu-Natal, with his wife, Leigh, son, Matthew, daughter, Sydney, and their much-loved domesticated menagerie.