Competition Commission orders Mpact to unwind R15.5m Seyfert deal
Regulator says the company violated the Companies Act as the acquisition eight years ago reduced competition
The Competition Commission has ordered packaging and recycling group Mpact to unwind its 2011 partial acquisition of cardboard box maker Seyfert Corrugated Western Cape, as it reduced competition.
The commission's order also comes after Mpact decided not to proceed with its initial application for approval to take a 49% holding in Seyfert.
Mpact said it did not ask for permission because it “believed that notification was not required when the acquisition was made”.
It did not agree with the commission’s ruling and said it would appeal its decision to the Competition Tribunal.
Mpact said if the unwinding were to happen, it would not have a material impact on the group. Mpact has a the market cap of about R4.2bn and valued its holding in Seyfert at R15.5m, according to its 2018 annual report.
Mpact obtained its holding in Seyfert at about the same time it was spun out of paper and pulp company Mondi and listed on the JSE in July 2011.
The commission said given “the nature of the anti-competitive concerns”, Mpact had to unwind the deal as there was no way to justify it. on the bases that it improved the performance of the group.
Although the commission had the power to amend mergers, it said the specifics of this deal could not be remedied, and the only option available was the unwinding of the deal.
Despite demanding that the deal be unwound, the competition regulator acknowledged that the 2011 transaction did not have a negative impact on employment at Seyfert or Mpact, and that there were no other public interest concerns.
The commission said though Mpact did not acquire “sole control” of Seyfert, it had still violated the Competition Act as the deal reduced competition. The regulator did not specify if any other businesses were specifically hurt by the deal or had lodged a complaint against Mpact over it.
Vani Chetty, from Vani Chetty Competition Law, said the commission’s objections to the deal were somewhat unusual, given the size of the transaction. With a value of R15.5m on Mpact’s books, it was well under the threshold of R100m needed to notify the commission.
Chetty said it could be a case of a bigger player buying up some of the smaller players but, other than this, there was no real reason for Mpact to notify the commission.
She said it was also unusual in that the regulator chose not to use the easier option of just fining Mpact for not notifying it. In contrast, by trying to undo the deal, it had made had opted for a messy process which ineffectively amounted to trying to “unscramble an egg”.