Massmart shareholders are set to benefit to the tune of R1.29 a share because the proposed acquisition by Wal-Mart Stores will not be implemented before March 18. Implementation of the deal after that date will add R250 million to the cost of the multibillion rand transaction for Walmart.

The R250m is equivalent to the dividend payment that Walmart will miss out on as it will not hold Massmart shares until April, at the earliest.

At this stage, it is unclear whether or not the trade unions will be able to significantly delay implementation of the transaction beyond April, if they are unhappy with any decision taken by the Competition Tribunal.

The tribunal hearing is set for March 22, which means that implementation of the transaction will only occur in mid-April, at the earliest. This means the current shareholders and not Walmart, will receive all of the interim dividends that were announced by Massmart last week.

In terms of the proposed transaction, which has been enthusiastically endorsed by shareholders, the Massmart shareholders are due to sell 51 percent of their shares to Walmart. This means that if the transaction had been implemented ahead of March 18, they would have received dividends on only 49 percent of their current shareholdings.

Initially, Walmart executives had targeted mid-to-end February for completion of the transaction. If that deadline, which appeared to have been based on an uninformed understanding of the competition process, had been met then Walmart would have taken ownership of the shares ahead of the payment of the interim dividend.

However, an issue that will be of greater longer-term concern for Walmart and Massmart, is the extent to which the trade unions can delay implementation of the transaction by appealing any decision taken by the tribunal.

In terms of the Competition Act, only the merging parties and the trade unions are entitled to appeal a tribunal decision. Trade unions are the only third parties with a right to appeal, but they are only entitled to appeal if they have participated in the tribunal’s proceedings. In this case the unions have given notice of their intention to participate in the proceedings, which means that they will have a right to appeal.

Union sources indicated to Business Report that they would challenge any decision they deemed unfavourable, regardless of how long it took.

What is unclear and has so far not been tested by any merger case heard by the competition authorities, is whether or not implementation of the merger has to be suspended until the appeal process has been completed. At this stage, the Walmart/Massmart merger seems set to be the first merger in which a participating union has not reached agreement with management.

One leading competition lawyer said on Friday that the Competition Appeal Court might interpret the union’s right of appeal as being restricted to employment-related conditions. “The court might restrict the union’s right to a consideration of employment conditions and allow the merger to go ahead while it reviews the employment aspect of the merger,” said the lawyer. - Business Report