Court Orders Innscor Africa to Divest from Profeeds

Court Orders Innscor Africa to Divest from Profeeds

Harare, Zimbabwe – In a landmark ruling, the Supreme Court has ordered Innscor Africa Limited to divest from Profeeds, citing concerns over the creation of a near monopoly in the stockfeed industry. The decision comes after a prolonged legal battle that scrutinised the merger between Profeeds and National Foods, both of which are under Innscor's control.

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The Supreme Court judges, led by Justice Tendai Uchena and supported by Justices Nicholas Mathonsi and Felistus Chatukuta, stated that the merger of these two previously competing companies under Innscor's umbrella resulted in a dominant entity that could reasonably become a monopoly.

“The coming together of two companies which previously were competitors, under Innscor, created a dominant unit which can reasonably become a monopoly,” the judges noted.

Innscor, which owns National Foods, the leading stock feed manufacturer in Zimbabwe, initially used its subsidiary Ashram Investments to acquire a 59 percent stake in Profeeds in 2013. This acquisition was promptly examined by the Competition Tariff Commission (CTC) in 2014, which prohibited the merger, deeming it contrary to public interest.

Court Orders Innscor Africa to Divest from Profeeds

Despite the CTC's prohibition, Innscor pursued another merger with Profeeds in 2015, this time acquiring a minority 49 percent stake. However, the companies failed to notify the CTC of this merger within the required 30-day period for transactions exceeding US$1.2 million, only doing so in 2019 after legal advice. The CTC, unimpressed by the delay, once again prohibited the merger and imposed a ZWL$40 million fine on Innscor.

Innscor's challenge to the CTC's decision at the Administrative Court initially resulted in a favourable ruling for the company. However, the CTC appealed to the Supreme Court, which overturned the Administrative Court's decision. The Supreme Court criticised the lower court for not adequately considering the potential harmful effects of the merger.

“The court a quo failed to consider the potential harmful effects of the merger. It therefore did not make its decision in terms of all the applicable factors in assessing a merger,” the judges ruled.

The Supreme Court highlighted that Innscor's controlling interests in both National Foods and Profeeds, as well as its significant stake in Irvines Zimbabwe, a major customer of both companies, indicated a desire to dominate the stock feeds market.

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“An analysis of Innscor’s conduct shows that it desires to wholly control the stock feeds market which is not permissible,” the court concluded.