JOHANNESBURG – SA Bidco, a new South African entity with no commercial operations and that has never traded before, has been given the green light to buy the local operator of British Airways, Comair.
The Competition Commission said yesterday that it had approved the proposed transaction between the two companies on condition that it would not result in a horizontal overlap because SA BidCo and its controllers did not conduct any activities or services that compete with Comair.
The commission said that its investigation found that there was no vertical overlap as the merging parties did not participate at different levels of the same supply chain.
It said the proposed transaction was aimed at ensuring the long-term sustainability and viability of Comair, as the company has not been trading since going into business rescue in May.
“Accordingly, the proposed transaction will not result in any market share accretion or any change in the competitive landscape in any relevant market,” said the commission.
In June, Comair warned shareholders that its profits for the year would fall more than 100percent only days after the airline filed for voluntary business rescue.
Comair, operator of British Airways in South Africa and low-cost airline kulula.com, said that it expected its earnings a share and headline earnings a share to plummet far below the 192.4cents and 197.2c respectively recorded during the corresponding period last year.
The beleaguered company reported a R564million loss for the first half of 2020, following an unprecedented situation due to the coronavirus lockdowns that saw the global aviation industry facing a near collapse.
Last month, Comair said it would be approaching lenders for additional funding of more than R1billion required for it to fly again, following a successful adoption of the rescue plan.
Comair planned to gradually return to service from December, with a seven-month ramp-up period until June 2021.
Comair’s joint business rescue practitioners, Shaun Collyer and Richard Ferguson, yesterday declined to comment on this new development.
Last month Comair needed at least R1.4bn additionally to get flying again.
It said R600 million would be committed to new debt while the remaining R800m would be deferred debt, with capital payments deferred for a year and interest for six months.
It said a number of former board members and executives would invest fresh equity of R500m in return for a 99percent shareholding once the suspensive conditions have been met.
The SA BidCo transaction would, however, cost at least 200 job losses, leaving the total staff complement at around 1681 as the new airline downsizes post-merger.
Comair and SA BidCo committed to make offers of employment to all retrenched staff when jobs become available at the new airline post-merger.
The commitment would apply for a period of 36 months after the flying start date and is subject to employees being suitably qualified.
The merged entity also committed to allocate a portion of its shares to a B-BBEE structure which will include an Employee Share Ownership Program.
The commission said the proposed B-BBEE initiative was a positive public interest outcome and will promote the public interest objectives in the Competition Act.
SA BidCo was not immediately available for comment.