However, the deal has not come without some stringent conditions. The Competition Commission from the beginning said it was prepared to direct how businesses should operate in South Africa to promote economic development when it imposed conditions on the buyout in the interest of competition and public concerns.
South Africa’s Department of Trade and Industry made a submission to the commission asking that the takeover be prohibited on the grounds that the paint market was highly concentrated, and it constituted a threat to the government’s localization drive.
The commission agreed with the department and gave the green light to the transaction on the condition that Kansai divested the automotive coatings business it operated in a joint venture with DuPont, as it would create a “forum for collusion.”
According to the deal, Kansai must manufacture decorative coatings in South Africa for 10 years; establish a manufacturing facility within five years and invest in local research and development.
The commission said these conditions address any anticompetitive harm that would have resulted from the merger and would ultimately increase South Africa’s manufacturing capacity in the paint market.
Despite more than 90 percent of Freeworld shareholders indicating they favored the takeover, the company had bitterly opposed the offer since Kansai made it in April last year.