Lewis ordered to submit acquisition affidavit

By Luyolo Mkentane Time of article published Jan 11, 2018

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JOHANNESBURG - The competition Tribunal has ordered retailer Lewis Group to submit an affidavit pertaining to its acquisition of high-end furniture retailer United Furniture Outlets (UFO) valued at R320million.

This after the South African Commercial Catering and Allied Workers Union (Saccawu) made submissions at the tribunal hearing in Pretoria yesterday, arguing a link existed between Lewis retrenching hundreds of workers and thereafter acquiring UFO, the cash retailer of luxury household furniture which Lewis aimed to take to the rest of Africa.

However, Lewis, which has more than 700 stores, retorted that it was not strange for businesses to retrench and acquire on the other hand.

In March 2016, the furniture group said that it had completed a R250m acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries, expanding its store presence outside of South Africa to 120.

The competition Tribunal has ordered retailer Lewis Group to submit an affidavit pertaining to its acquisition of United Furniture Outlets Photo: Simphiwe Mbokazi/ANA

The Competition Commission said there were no competition concerns arising from the proposed merger between Lewis and UFO. It was unlikely that a link existed between Lewis retrenching and then acquiring UFO, which was established in 2004 and has a retail footprint of 30 stores. More than half the outlets are located in Gauteng, including its flagship 5000m² mega-store in Marlboro, Sandton.

Third parties

The commission stressed that UFO, which sells a variety of furniture, including lounge, bedroom and dining-room products, did not have drivers and porters as it sourced such from third parties. UFO also did not sell on credit as its operations were cash-based.

The commission said of the 26 Lewis stores that had been closed recently, only two were based in the same town as UFO. The commission further found that Lewis retrenched because of unfavourable economic conditions.

“The commission finds that should Lewis merge with UFO it is unlikely that employees may be negatively affected. Lewis intends to manage UFO as a separate business within the Lewis Group. There will be no employment concerns arising from that,” the commission submitted.

Have you read: LEWIS group and Saccawu square up over job losses

It had also recommended that the Competition Tribunal approve the UFO acquisition on condition that the merging parties would not retrench employees as a result of the transaction for two years from the date of the merger.

But Saccawu’s head of department, Khulekani Nguba­­ne, said Lewis had retrenched about 400 employees since December 2016, in anticipation of the UFO transaction.

The retrenchments were meant to “smoothen up” the deal and attempt to reduce the duplication of functions once the merger was concluded.

Competition Tribunal chairperson Norman Manoim concurred that they did not have information on the Lewis decision to start retrenchments and the timing of the acquisition and whether the two issues were linked.

He then ordered Lewis to submit an affidavit to that effect.

- BUSINESS REPORT

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