Lewis goes to court to stop Pepkor takeover

The Lewis Group has approached the last body of authority on legal disputes in South Africa, the Constitutional Court, to challenge a proposed takeover by Pepkor.

This comes after an approved merger of Pepkor and Shoprite last year.

Pepkor wants to buy Shoprite’s furniture assets, including Bradlows, Russells, OK Furniture and House and Home, for R3.2 billion.

Last year, Lewis attempted to block this takeover through the South African Competition Authority, however, the Competition Appeal Court revoked its right to intervene.

It decided that having a commercial interest in the deal is not enough reason for Lewis to challenge the merger.

Lewis is now challenging that decision in the Constitutional Court with the aim to contest the merger on competition law grounds.

Pepkor is a South African retailer with shops in Namibia, including Pep, Ackermans, Refinery, Tekkie Town, Shoe City, Dunns, Exact, Choice Clothing, Russels, Bradlows, Sleepmasters and Incredible Connection.

Meanwhile, Shoprite Holdings owns Shoprite, Checkers, Checkers Hyper, Usave, Ok Foods, Ok MiniMark, Ok Furniture, and House & Home.

This gives Pepkor market dominance.

Lewis argues that the transaction would harm consumers.

In its affidavit before the apex court, Lewis’ legal head, Ryan Lepart, says the proposed merger would create an “insurmountably dominant firm of size and scale”.

According to the affidavit, the merged entity would have a 59% market share based on store count in the relevant market, with over 1 100 stores,

“It will result in higher prices and worse credit terms for a section of the South African citizenry who are vulnerable to increases in price and decreases in quality and are unable to protect themselves against such developments,” it says.

The Constitutional Court is expected to adjudicate on the matter on an urgent basis.

On behalf of the group, Pepkor Lifestyle chief executive Peter Griffiths in his affidavit says Lewis’ approach would discourage investors.

“If allowed to continue, this would send a chilling signal to domestic and foreign investors.

The long-stop date of the present merger similarly may be in jeopardy if this application is not dismissed urgently by this court,” he says.

Griffiths says Lewis wants to intervene so it can frustrate a transaction between two of its competitors, even though it is capable of contributing meaningfully to South Africa’s economic growth.

The Lewis Group owns Lewis, Best Home & Electric and Beares.

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