Competition Commission endorses Novus takeover of Mustek despite TRP ruling

The Competition Commission has recommended the approval of Novus Holdings' proposed takeover of Mustek, a move that comes in the wake of a recent ruling from the Takeover Regulation Panel (TRP) which found that the DK Trust acted in concert with Novus in the mandatory buyout.

This complicated web of corporate governance was highlighted in a detailed ruling published on Tuesday, which mandates immediate compliance with takeover regulations.

This endorsement is particularly significant given the TRP's findings, which determined that the DK Trust’s irrevocable undertaking, signed on November 13, 2024, significantly facilitated Novus’s bid of R13 per share for Mustek.

The Trust’s decision not to accept the offer or sell its Mustek shares until the deal concluded was deemed a "critical enabler," effectively reducing Novus's financial exposure under Regulation 111 by approximately R123 million.

The ruling indicated that this arrangement met the criteria for "acting in concert" under the Companies Act.

In a statement released on Wednesday, the Competition Commission affirmed that the prospective takeover is unlikely to substantially lessen or prevent competition in any related markets.

“The primary acquiring firm, Novus, is listed on the Johannesburg Stock Exchange (JSE) and is controlled by A2 Investments Partners,” the Commission noted.

Novus operates in the commercial printing, manufacturing, and packaging sectors, while Mustek, co-listed on the JSE, is predominantly engaged in the ICT sector, assembling and distributing a variety of computer products and services throughout South Africa.

Attention to public interest concerns was also a focal point of the merger discussions.

The Commission revealed that Novus and Mustek had agreed to a two-year moratorium on retrenchments post-merger, combined with preferential employment conditions for any employees retrenched from the Mustek Group prior to the merger.

This gesture appears aimed at assuaging fears of job losses amidst the corporate transition.

Siya Makunga from the Competition Commission elaborated that the Tribunal will now evaluate the case and ultimately decide the fate of the acquisition with or without conditions. He emphasised that their assessment was strictly tied to the provisions of the Competition Act.

“There was no overlap found that could negatively impact competition,” he confirmed.

Harry Smith, a shareholder activist, expressed optimism regarding the Commission's thorough analysis, stating that the TRP's conclusions held weight and reflected a shift towards more diligent oversight in corporate acquisitions.

"Their mandate is to ensure that jobs are not at risk and the takeover does not present an unfair advantage to other companies on the JSE and as far as they are concerned the takeover has met that requirements," Smith said.

“It's good that TRP are making rulings like as in the past we didn’t see this as much and I do believe that there was fraud involved in Novus takeover offer of Mustek. The ruling and its findings  will have to be taken into consideration before a vote is taken on the takeover of Mustek. It's just that the Commission can’t do anything as per their mandate.”

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