FISHING company Oceana’s acquisition of the fishing business of Foodcorp, valued at about R445m, was approved this week, subject to a divestiture condition imposed on the firms by the Competition Commission.
The commission ordered Oceana to sell Foodcorp’s Glenryck pilchards trademark as well as the quota for small pelagic, or open-sea, fish allocated to Foodcorp by the Department of Agriculture, Forestry and Fisheries.
The commission found the transaction would affect competition negatively in the market for the harvesting, processing and marketing of canned pilchards. It would also have a detrimental effect on customers.
It said on Thursday morning that Foodcorp’s fishing business essentially constituted the business of harvesting, processing and selling deep-sea trawl hake, south coast rock lobster and small pelagic fish such as pilchards, anchovies and red eye. It owns the Glenryck brand.
Oceana is also active in the markets for harvesting, processing and selling deep-sea trawl hake, south coast rock lobster and small pelagic fish, and it owns the Lucky Star brand. The transaction would result in the removal of Oceana’s closest competitor.
Oceana last year paid an administrative penalty of almost R35m — or 5% of its affected turnover in 2010 — after admitting it had contravened the Competition Act.
The group and other companies in the small pelagic fishing industry were accused of price fixing, market and customer allocation, sharing sensitive information and agreeing not to compete against each other.
The conditional approval will leave Oceana with more than 80% of the market. Its nearest competitor will have less than 10% of the market.
The commission said it was aware of the difficulties to enter the market for the harvesting, processing and marketing of canned pilchards. It was also difficult to expand in the market, given regulatory barriers, high capital outlays, brand loyalty and input scarcity.
To allow for another player in the market, the Glenryck brand would have to be sold to an independent entity before the parties could implement the transaction.