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UPDATE May 15 – The acquisition of South African Airways (SAA) by Takatso Aviation Proprietary Ltd seemed to be a step closer late last week after the Competition Commission announced that two shareholders would divest their interest in Takatso. The Commission would recommend to the Competition Tribunal to approve the proposed merger, which would see Takatso buy 51 percent of SAA. However, the two shareholders responded this weekend that they have no intention to withdraw from the SAA/Takatso take over bid at all. Take over of South African Airways gets a step closer.
Takatso announced in June last year that it wished to acquire a majority share of SAA, with the remaining 49 percent to be owned by the Department of Public Enterprises (DPE). The transaction has become complicated because Takatso is owned by majority shareholder Harith General Partners Proprietary and Global Aviation Operations Proprietary Ltd and Syranix Proprietary Ltd.
The two minority shareholders Global Aviation and Syranix also own Lift, a rival airline of South African Airways. Global leases aircraft to Lift while Syranix co-owns the Lift trademark.
Potential conflict of interest
The acquisition of SAA by a consortium that includes two parties that also own Lift would “likely result in a substantial lessening and prevention of competition in the domestic passenger airlines market,” the Competition Commission said. “That is because the merger will likely facilitate the exchange of competitively sensitive information between SAA and Lift, through Global Aviation and Syranix having shareholding and the ability to appoint directors to Takato’s board of directors.
The Commission said in a statement on May 12: “Takatso will have access to SAA’s competitively sensitive information by virtue of its majority stake in SAA, pursuant to the proposed merger. This concern is further exacerbated by the fact that the domestic passenger airlines market is highly concentrated, barriers to entry are high and is amendable to coordinated effects.”
The Competition Commission was concerned about a conflict of interest if the shareholders of Lift would also get a share of SAA. (AerCap)
This unwanted situation seemed to have been remedied after the Competition Commission said on May 12 that Global Aviation and Syranix were willing to divest from Takatso, although this condition was met by strong opposition “It was only after the merging parties agreed to the imposition of the remedial conditions initially proposed by the Commission which include divestiture conditions and a moratorium on merger-related retrenchments and to maintain a minimum number of employees at SAA that the Commission has now recommended conditional approval of the merger.”
However, former Takatso CEO Gidon Novick, who still represents the Global Aviation and Syranix combination, was quoted by CH-Aviation on May 15 that the two companies have no intention at all to divest from the Takatso/SAA merger plan. Novick said there is no conflict of interest in the roles of the shareholders, as Lift’s focus is on domestic trunk routes and not the regional and international network SAA is pursuing. Global Aviation and Syranix would be willing to reduce their share in SAA but remain keen to be involved.
It is now up to the Competition Tribunal to approve the merger subject to the recommended conditions. “The Commission notes that its role in the assessment of large mergers is advisory in nature and its recommendation has been referred to the Tribunal for a final decision.”
Fleet expansion
The news comes a week after SAA said it would almost double its fleet from seven to thirteen aircraft this year by leasing in additional capacity. The carrier already has secured leases on two Airbus A330s, allowing it to recommence international services. A request for proposal on four Airbus A320-family aircraft is pending, but SAA hopes to have the aircraft available no later than in September.
The announcement follows the approval of the South African ministers of Finance and Public Enterprises. SAA emerged from a business rescue plan in September 2021 but has been able to operate only on a reduced scale due to the limited size of its fleet.
