Employees are set to gain shareholding through a deal whereby JSE-listed Net1 SA wants to acquire Ovobix and Luxanio.
This, after the Competition Tribunal released the public reasons for its decision to conditionally approve the large merger.
After implementation of the proposed transaction, Net1 will control Ovobix and Luxanio.
Ovobix and Luxanio are investment holding companies that provide services such as automated cash management, card payment solutions, as well as prepaid and value-added services, as well as unsecured short-term business loans to the South African retail sector.
In a statement, the tribunal says it approved the proposed transaction subject to a set of conditions, including the establishment of an employee share ownership programme (ESOP) for the benefit of workers.
The tribunal’s imposed conditions include a provision that Net1 establishes an ESOP for the benefit of workers of the merged entity to receive shareholding in Net1 equal in value to at least 3% of the issued shares in Net1, as at the implementation date of the proposed transaction, in accordance with certain ESOP design principles.
The Competition Commission, which investigates large mergers before referring them to the tribunal for a decision, ultimately concluded that the proposed transaction is unlikely to result in any competition concerns.
The tribunal says it has no reason to disagree with the commission’s assessment and has concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market.
According to the tribunal, the merger parties confirmed the transaction will not result in any retrenchments.
It says there were pre-merger retrenchments at Net1 due to operational reasons unrelated to the merger.
Considering the current economic climate and South Africa’s unemployment rate, the merger parties agreed to a condition for a 24-month period involving retrenched employees being given preference when vacancies become available in the merged entity within certain limitations, says the competition watchdog.
The commission found that the merger does not promote a greater spread of ownership by historically disadvantaged persons and workers in firms in the market, as the proposed transaction will result in a dilution of B-BBEE shareholding by 1.62%.
To address this concern, conditions involving the establishment of an ESOP were proposed by the commission and agreed to by the merger parties.
“The tribunal sought clarity and further details from the parties regarding certain aspects of the tendered conditions relating to the ESOP, including issues such as the level of shareholding allocation in Net1 to the ESOP; what costs, if any, there will be to the employees/beneficiaries regarding the ESOP; the funding arrangement; the criteria to be applied for qualification as a beneficiary and any exclusions that may apply; benefits that the beneficiaries will be entitled to; employee representation; and consultation processes,” the tribunal says.
It adds the merger parties subsequently enhanced the tendered ESOP-related conditions in certain respects.
These amended ESOP-related conditions were acceptable to the tribunal after motivation by the merger parties and the commission.
The merger parties also made commitments to supplier and enterprise development initiatives and socio-economic development investments.
In terms of the tribunal’s imposed conditions, Net1 will make a combined contribution equivalent to R12 million in Net1’s current financial year, to supplier and enterprise development initiatives, together with socio-economic development investments.