KIRSH HOLDINGS, SWAKI INVESTMENT CORPORATION IN ALLEGED MERGER DISPUTE

MBABANE - Kirsh Holdings Limited and Swaki Investment Corporation (PTY) Limited are embroiled in an alleged merger dispute with Eswatini Competition Commission (ECC).

A  merger is an agreement that unites two existing companies into one new company. There are several types of mergers and also several reasons why companies complete mergers. Mergers and acquisitions are commonly done to expand a company’s reach, expand into new segments, or gain market share.

The two companies are now appealing the decision of the ECC board of commissioners, which among other conclusions found that the transaction between them (Kirsh Holdings Limited and Swaki Investment Corporation (PTY) should have been notified to the ECC, due to material change of control.
The companies are also of the view that the ECC Board erred in finding that the two entities in the joint venture had equal powers and an equal number of appointed directors and therefore, had equal say at the board level in terms of decision-making.

The appellants (Kirsh Holding Limited and Swaki Investment Corporation (PTY) further argued that the ECC commissioner erred in finding that: “Kirsh Holdings Limited, Swaki Investment Corporation) and SIDC had a joint control in Swaki prior to the termination of the joint venture and consequently the acquisition by the respondent of the remaining 50 per cent of shares in Swaki upon termination of the joint venture, resulted in a change in the quality of control from joint to sole control.” Kirsh Holding Limited and Swaki Investment Corporation (PTY) Limited have since filed an appeal at the High Court, where they are challenging the decision of the board.

Erred

According to the appellants (Kirsh Holdings Limited and Swaki Investment Corporation (PTY) Limited, the ECC Board erred in limiting the assessment of the case to determining, where there was joint or sole control; whether the quality of control was materially altered at the demise of the joint venture and whether this situation resulted in a merger triggering the obligation to notify the transaction under the Competition Act. It was further the appellants submission that the board, allegedly erred in limiting the assessment of the case to only three factors, namely; the appointment of the chairman of the board of directors of Swaki (joint venture) by the appellants; the existence of a casting vote by the chairman and the management contract awarded by the appellants.

“The board erred in not applying the principles of settled merger regulation that, control is construed de facto or de jure or a combination of both and as such merger review is a highly fact dependent exercise,” contended the appellants. The appellants are further of the view that the board erred in finding that, in the absence of the chairman of the board presiding over meetings, an SIDC representative may hypothetically have been elected to chair the meeting, somehow negating the appellants’ casting vote as a function of their shareholding. T

hey further argued that the board was wrong in finding that the appellants submitted insufficient evidence in support of their argument, that this hypothetical possibility never materialised and there was never an instance where SIDC chaired a general meeting of Swaki.

“The board erred in finding that where two or more undertakings or persons have the possibility to exercise decisive influence over another undertaking, they have joint control. The board misdirected itself in relying on the email that the appellants and SIDC worked on a basis of unanimous assent historically to be inconsistent with sole control,” reads part of the appeal.

These are allegations contained in a notice of appeal, whose veracity is still to be tested, and the respondent (ECC) is still to file its papers in the event it is opposing the matter.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: