South Africa: Regulator blocks AFF/Vuka Forestry deal

The Competition Commission of South Africa has prohibited a proposed transaction whereby Africa Forestry (AFF) intended to acquire Vuka Forestry Holdings and Glen Village Trading.

AFF forms part of entities including MTO Forestry, Ramanas Farms, Imvelo Forests, and Peak Timbers Limited, among others, collectively referred to as the ASF Group.

The ASF Group is active in the plantation of hardwood trees which they harvest and sell as transmission pole logs, building and fencing pole logs, mining timber logs, and pulp wood, among others. Vuka is involved in a treatment of poles operating from a facility in Commondale, Mpumalanga. Vuka primarily produces treated transmission poles and treated building and fencing poles.

The proposed transaction would have resulted in an overlap in the business activities of the parties in relation to the supply of treated building and fencing poles. This overlap, however, does not raise competition concerns in the market for the supply of treated building and fencing poles as the parties combined post-merger market shares remain relatively low.

However, the Commission found that the proposed the transaction raised several competition concerns from a supplier-customer (vertical) relationship perspective with respect to  transmission pole logs. ASF Group supplies transmission pole logs to Vuka and its rivals which they use them as inputs to produce treated transmission poles