By Rumbidzai Zinyuke
ZIMBABWE Stock Exchange-listed Innscor Africa was found guilty of not following proper regulatory procedures in its acquisition of a majority stake in National Foods Limited (NatFoods) and could be liable to a fine as high as US$60 million.
The Competition and Tariff Commission passed judgment against Innscor Africa Limited following allegations that it did not follow proper regulatory procedures.
CTC director Mr Alex Kububa said investigations carried out by the commission had revealed that Innscor had acted against regulations on undertaking the merger.
“We found that Innscor had indeed implemented a merger without notifying the regulator and this means we can penalise them according to the Competition Act,” he said.
According to the Act, if a company does not notify the regulator of a merger or the acquisition of a controlling stake within 30 days, it could be penalised an amount not exceeding 10 percent of its annual turnover.
Innscor, which recorded a turnover of US$656 million for the 12 months to June 2013, could be ordered to pay up to US$65 million as a fine.
CTC says Innscor gradually increased its shareholding in NatFoods, but failed to notify the relevant authorities, in particular the commission, of the process. Innscor is said to have only given notification of the acquisition when investigations into the move had already started.
Innscor acquired a 36 percent stake in NatFoods in 2003 and increased it to 49,9 percent in 2011, but later sold around 11 percent in 2012 to Tiger Brands leaving it with 37,82 percent. CTC only received notification of the transactions in 2012.
The probe was instituted in accordance with Section 28 (2) Chapter 14:28 of the Competition Act, under which the conglomerate was being probed for possible restrictive practices and creating unfair trade barriers against potential competition.
However, Innscor – which has denied the allegations – has reportedly filed an appeal with the Arbitration Court against the judgment arguing that they had notified the commission before consummating the deal.
Mr Kububa said since the company had appealed against the penalty with the Arbitration Court, the commission had to wait for the court’s decision.
“We now have to wait for the hearing at the Arbitration Court before we can continue with the issue,” he said.
Efforts to get a comment from Innscor were fruitless as the group’s corporate affairs executive, Mr Musekiwa Khumbula, rarely responds to the Press.
CTC opened preliminary investigations over alleged restrictive measures created by Innscor’s backward integration in June 2011. Backward integration involves the purchase of a supplier, usually done to reduce supplier power and cut input costs.
The group has in the past few years made several acquisitions under its strategy of backward integration within the fast-moving consumer goods supply chain. The group purchased a 49 percent stake in July 2009 of Irvine’s Zimbabwe, a major producer of chicken and table eggs.
It also shored up its interest in Colcom Holdings Limited, the country’s single largest pork producer and has a controlling interest in biscuit maker Iris and Breathway, commonly known as Zap-snacks.
The conglomerate runs a vibrant retail division which consists of the Spar Corporate Store retail operations and the fast foods operations that include Chicken Inn, Baker’s Inn, Creamy Inn and the local Nando’s franchise.
Innscor has grown from a small private Zimbabwean business to one of the top public companies in less than 20 years.