Seed companies refuse to give up on merger

Seed companies Du Pont Pioneer and Pannar have filed an appeal with the Competition Appeal Court to try and have a decision disallowing their proposed merger overturned.

Seed companies Du Pont Pioneer and Pannar have filed an appeal with the Competition Appeal Court to try and have a decision disallowing their proposed merger overturned.

In early October, the Competition Tribunal, a court that adjudicates competition matters, ruled against Pioneer’s proposed acquisition of a majority share of Pannar. This upheld an earlier decision by the Competition Commission, a body which, among other duties, investigates mergers.

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Both seed companies believe there is compelling evidence that the transaction would not be anti-competitive, but will have to wait some weeks for the tribunal to formally release its reasons for stopping the merger.

Pannar’s managing director, Deon van Rooyen, said he preferred not to indicate what Pannar’s current market share in South Africa and Africa were at the moment. Nor did he want to speculate on what the market share of a merged Pioneer and Pannar would be because it was something that the Competition Appeal Court would likely have to consider and rule on.

“Genetically modified (GM) maize comprises roughly 75% of the South African market. Virtually 100% of GM traits currently used in South Africa are from one company, also competing in the hybrid maize seed market, which perhaps also distorts perceptions somewhat,” Van Rooyen added.

Jac Marais, an expert on competition law with Adams & Adams, said that the pro-competitive gains that would arise from the Pioneer/Pannar merger would likely be one of the main focuses of the companies’ appeal.

“The commission and the tribunal have alluded to the possibility of other international suitors that would be interested in acquiring Pannar if the transaction is prohibited,” he explained. “Although this may be possible, it will be cold comfort for Pannar, which has negotiated a transaction with Pioneer on terms that are acceptable to its shareholders. The same deal may not be available from other major players.”

Marais pointed out that the tribunal’s decision came on the back of the Walmart saga, which also concerns the merger of an international giant with a South African firm. He felt that prohibitions of international transactions would inevitably send a negative message to prospective investors. – Lloyd Phillips