Sefalana opposes Bluehearts acquisition

SHARE   |   Tuesday, 12 July 2016   |   By Kabelo Adamson
Ramachandran Ottapathu Ramachandran Ottapathu

Retail giant Sefalana Group has raised an objection to the acquisition of Warbler Holdings (Pty) Ltd and its subsidiaries by Bluehearts (Pty) Ltd- a company wholly owned by Ramachandran Ottapathu of Choppies Enterprise Limited. At a public hearing before the Competition Authority on Monday on the proposed acquisition, Sefalana said if the deal is given a green light it will disadvantage them. The common concern among industry stakeholders, in particular Safalana, is that the proposed transaction would enable Ottapathu to offer Choppies better and preferential deals on products they currently source from Warbler subsidiaries. Now, the CA has to make a tough decision whether or not to authorize the proposed acquisition.

Sefalana Group Finance Director, Mohammed Osman said they currently procure the Hisense brand from one of the Warbler subsidiaries which is the sole supplier of the brand in the country. He said they also procure brands such as Samsung from the same source. Warbler Holdings has four subsidiaries being IT4Africa (Pty) Ltd, Goldtech (Pty) Ltd, Healthwest Africa (Pty) Ltd and Solid Logistics (Pty) Ltd, all of which are Bluehearts targets.  All but one of Warbler subsidiaries deals with supply of electronic gadgets and consumer appliances with Solid Logistics providing logistics, warehousing and freight services to the other three subsidiaries.

Although Osman conceded that Choppies is not the acquiring entity, he argued that in substance the transaction would amount to virtually the same result due to the common ownership structure, drawing the Authority’s attention to section 26 (1) of the Competition Act which prohibits vertical agreements which involve re-sale price maintenance. He added that Section 27 of the same Act prohibits such transaction where it would prevent or substantially lessen competition in the market.

In response, the acquiring company and the target company through their lawyer, Kwado Osei-Ofei asked that they be given time to respond to Sefalana’s objection to the proposal. Ottapathu however said Choppies has no plans yet to sell electronics supplied by the targets. The proposed acquisition, if given a go ahead, would, according to Osei-Ofei result in no job losses with the business expected to run as it is at the moment. “It is expected that the acquisition will not result in any job losses unless there are individuals who do not wish to be part of the entity going forward,” he said.