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SAA – Takatso Merger Recommended For Conditional Approval by Competition Commission

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The Competition Commission in South Africa has recommended the conditional approval of the proposed merger between Takatso Aviation and South African Airways (SAA), subject to divestiture and employment conditions. The proposed merger would see Takatso acquire 51% of the issued share capital of SAA from the South African Government, while the remaining 49% shareholding in SAA would be retained by the Department of Public Enterprises (DPE).

Takatso is a newly incorporated company consisting of Harith General Partners, Global Aviation Operations, and Syranix. Harith is an asset management firm with investments in infrastructure projects, including Lanseria Airport. Global Aviation leases aircraft and operates the domestic passenger airline known as ‘Lift,’ while Syranix co-owns the Lift trademark and provides management support services to airlines.

The Competition Commission expressed concerns that the merger would likely result in a substantial lessening and prevention of competition in the domestic passenger airlines market, as it would facilitate the exchange of competitively sensitive information between SAA and Lift. To remedy this concern, the Commission and the parties agreed to a divestiture condition requiring Global Aviation and Syranix to completely divest from Takatso before the merger’s implementation.

The parties initially rejected the divestiture and employment conditions proposed by the Commission, leading to the Commission recommending the prohibition of the merger. However, the parties eventually agreed to the remedial conditions, leading to the Commission’s recommendation for conditional approval of the merger.

The Commission found that Harith’s investment in Lanseria is unlikely to raise vertical (foreclosure) concerns, considering recent investments in expanding and improving the airport and the availability of Johannesburg International Airport as an alternative.

The Commission recommends that the Tribunal approve the merger subject to the recommended conditions. The Commission’s role in assessing large mergers is advisory in nature, and its recommendation has been referred to the Tribunal for a final decision.

If approved, the merger would see SAA relaunch international routes and increase seat capacity for its regional and domestic destinations. It would also mark a significant step forward in SAA’s recovery from business rescue and the impact of the Covid-19 pandemic.

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