Competition watchdog tough conditions on acquisitions in bid to protect jobs, consumers

The General Motors East Africa assembly plant on Nairobi's Mombasa Road. Japanese automaker Isuzu has taken over the firm. [File, Standard]

The regulator has in the recent past allowed the sale of a number of companies, but with tough conditions.

This is meant to secure jobs and ensure that consumers do not get a raw deal when the firms change hands.

The Competition Authority of Kenya (CAK) last week announced that the new owners of vehicle assembler General Motors East Africa (GMEA) would be required to retain the employees as well as honour some of the deals that had been made before the acquisition.

The new entity will also be required to take over after-sales service agreements for already sold vehicles as well as continue engaging the same dealers. The acquisition by Isuzu of the 57.73 per cent owned by America’s GM saw the motor firm exit the Kenyan market after more than four decades of operations in the country.

The firm played a critical role in growing the local vehicle assembly industry. The vehicle assembler’s other shareholders include the government-owned Industrial and Commercial Development Corporation, Centum Investments, and Japanese trading company Itochu Corporation.

“CAK has authorised the proposed acquisition of 57.73 per cent of shares in GMEA by Isuzu Motors Ltd on condition that the merged entity will absorb all the 383 General Motors East Africa Limited employees, continue with the after-sales service of all the vehicle brands sold and leased by GMEA for the duration of all the after-sales service contracts, and honour all existing dealership agreements between GMEA and its dealers,” said the authority in a public notice on Friday.

CAK also approved the sale of Habib Bank by Diamond Trust Bank. The approval was also conditional on the absorption of Habib Bank employees.

The approval by the competition watchdog follows consent from the Central Bank of Kenya, which  last Friday also announced that the transaction had been concluded and that beginning today Habib Bank would cease to exist in Kenya.

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CAK mid-July also subjected the acquisition of Centum’s stake in Kenya Wine Agencies (KWAL) to similar conditions. South Africa’s Distell, which is acquiring a 26 per cent stake in the Kenyan alcoholic firm, will be required to retain its employees as well as continue production of some of the juices, wines, and spirits that KWAL manufactures.

When the transaction is concluded, Distell will own a controlling 52 per cent stake in the company. KWAL imports some of the major brands manufactured by Distell and there have been fears that some of the locally made brands would disappear should Distell discontinue local manufacturing and instead opt to import.