Investors with interests related to South African operator Lift have agreed to divest their involvement in the Takatso consortium that is to take a controlling interest in South African Airways, clearing a path for competition authorities to approve the deal.
South Africa’s Competition Commission says it is recommending the country’s Competition Tribunal clear Takatso Aviation’s merger with SAA, under which it will acquire a 51% stake in the airline from the government.
Takatso first emerged as the potential investor in SAA during the airline's formal financial restructuring, a deal which paved the way for SAA to resume operations in September 2021. The competition body subsequently opened a probe into the merger after it received notification of the deal in June last year.
The Takatso consortium is majority-led by asset management firm Harith General Partners. While Harith holds an investment in Lanseria airport, the competition body considered this is unlikely to have a significant impact because of investments to develop Lanseria airport and the availability of Johannesburg airport as an alternative.
However it did identify issues relating to the consortium’s minority shareholders, Global Aviation and Syranix, which are involved in Lift. Aircraft lessor Global Aviation owns the airline while Syranix co-owns the Lift trademark and provides management service to airlines.
"The Commission found that the merger is likely to result in a substantial lessening and prevention of competition in the domestic passenger airlines market,” says the regulator.
"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 Takatso’s board of directors. Takatso will have access to SAA’s competitively sensitive information by virtue of its majority stake in SAA, pursuant to the proposed merger.
”To remedy this concern, the Commission and the parties have now agreed to a divestiture condition in terms of which Global Aviation and Syranix will completely divest from Takatso prior to the merger’s implementation. The Commission considers that this ‘fix-it-first’ remedy is appropriate in the circumstances given the extent of the competition concerns identified.”
The parties had initially rejected the divestiture conditions, prompting the Commission previously to recommend blocking the merger.
”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,” it says.
The Commission’s role is advisory and a final decision on the merger will be taken by the competition tribunal.
Under the proposed deal, agreed in June 2021, SAA will remain 49%-owned by the South African government through the country’s public enterprise ministry.
Domestic carrier Lift launched operations in December 2020 using Airbus A320s leased from Global Aviation.