Ramachandran Ottapathu wins Warbler war but can’t celebrate

Mr. Ramachandran Ottapathu (Pic choppies.co.za)
Mr. Ramachandran Ottapathu (Pic choppies.co.za)

The Competition Authority has conditionally authorised the acquisition of the entire issued shareholding of Warbler Holdings (Pty) Ltd in IT4Africa Botswana (Pty) Ltd; Goldtech (Pty) Ltd; Healthwest Africa (Pty) Ltd; and Solid Logistics (Pty) Ltd, together with all assets related to the business operations of the aforementioned entities by Bluehearts (Pty) Ltd.

This deal was objected to by key players in the retail industry as it raised many red flags since the acquirer enterprise is owned by Choppies chief executive officer Ramachandran Ottapathu. There were a number of competition concerns raised especially by Sefalana Group, which has had running battles with Choppies.

The regulator has ruled that Bluehearts (Pty) Ltd will continue to supply the same retailers that were previously supplied by Warbler Holdings (Pty) Ltd on terms no less favourable to those offered by Warbler Holdings (Pty) Ltd to the retailers, pre-merge.

Equally, it ordered Bluehearts to annually, for a period of five (5) years from the implementation date, submit to the authority a detailed report indicating a list of its new and old customers and the trading terms.

“The report is to be compiled by an Independent Consultant approved by the Authority, and Bluehearts (Pty) Ltd shall bear the costs of engaging such a Consultant. Warbler Holdings (Pty) Ltd shall in two weeks after the decision date, submit a detailed list of Warbler Holdings (Pty) Ltd’s current customers and trading terms to the Authority”.

It was ruled that within 12 months from the decision date, Ottapathu is to divest his interests in the following companies: Montrose Investments (Pty) Ltd t/a RiteFurn; Callao (Pty) Ltd t/a RiteFurn; Peardale (Pty) Ltd t/a RiteFurn; Decolite (Pty) Ltd t/a RiteFurn; and Mont Catering and Refrigeration, and shall inform the Authority of this disposal within 30 business days of concluding the final sale agreement(s) and submit a signed copy of the sale agreement(s) to the Authority as proof thereof.

“In addition, for a period of five (5) years from the implementation date, Mr. Ottapathu should not either as a principal, agent, partner, representative, shareholder, director, employee, consultant, advisor, financier, or in other like or similar capacity, directly or indirectly be associated with, interested or engaged in any firm, business, company or other association of persons which carries on a business activity similar to the business carried on by the companies listed…”.

Competition Authority also noted that in view of the fact that Ottapathu also has controlling interests in enterprises that deal with the retailing of branded consumer electronics, Choppies Enterprises Limited shall for a period of five (5) years from the date of this decision, not enter the market for the retailing of branded consumer electronics currently traded by Warbler Holdings (Pty) Ltd, for as long as he has a stake in the BSE listed retail giants.

However, in the event that Choppies Enterprises Limited decides to enter this market, Ottapathu is to immediately notify the Authority of this intent and the terms under which Choppies would be supplied by Bluehearts (Pty) Ltd.

The acquisition of Warbler Holdings by Ottapathu’s Bluehearts has pitted strength against the man who made Choppies the top listed retailer in the country against competition that included Furnmart and Sefalana.

The Competition Authority was compelled to hold a public hearing where a number of objections were made to the proposed transaction. Sefalalana Group through MD, Chandra Chauhan argued that, “Sefalana currently procures a wide range of products from the companies that are targeted by Ottapathu and we have done so for many years”. Odirile Merafhe of Cash Bazaar Holdings pointed out that if the deal is allowed to through it might limit job creation opportunities.

The authority said it is cognisant of the merging parties’ commitment to retain the current employees of the target entity. “In light of this, the merged entity shall ensure that there are no retrenchments of any employee associated with this merger commencing from the approval date,” it noted.