South Africa’s Competition Commission approved Heineken’s purchase of wine and cider company Distell Group as long as the merged entity invests more than 10 billion rand ($578 million) over five years in the country.

The Commission said the investment would be to maintain and grow the aggregate productive capacity of its operations and related facilities in South Africa.

“ We are very excited to bring together three strong businesses to create a regional beverage champion, perfectly positioned to capture significant growth opportunities in Southern Africa.

Distell is a highly regarded, resilient business with leading brands, a talented workforce and a strong track record of innovation and growth in Africa. With NBL, there are exciting opportunities to expand premium beer and cider in Namibia and grow the iconic Windhoek brand beyond its home market. Together we will be able to better serve our consumers and customers through a unique combination of multi-category leading brands and a strengthened route-to-market. The businesses share common values derived from their family heritage, long-term perspectives, entrepreneurial spirit, and care for people and planet.

We have successfully built our business in Africa over 100 years.  Today’s announcement is a vote of confidence in the long-term prospects of South Africa and Namibia and we commit to being a strong partner for growth and to make a positive impact in the communities in which we operate” said DOLF VAN DEN BRINK CHAIRMAN OF THE EXECUTIVE BOARD/CEO, in an earlier press communiqué.

The Dutch brewer announced in November its planned purchase of Distell and Namibia Breweries Ltd to form a southern African drinks group worth 4 billion euros ($4 billion).

The Commission recommended that the Competition Tribunal, which makes the final decision, approve the merger subject to conditions.

This is because it found that the proposed transaction is likely to substantially prevent or lessen competition in the relevant markets as the merged entity will be a dominant supplier of flavoured alcoholic beverages, with a market share above 65% and would be the largest supplier of ciders in South Africa.

“To address the competition concerns arising from the transaction, Heineken has committed to divest its Strongbow business in South Africa and other SACU (Southern African Customs Union) countries,” the Commission said.

The Commission and the merging parties also agreed to implement an Employee Share Ownership Scheme that will transfer more than 3 billion rand of equity to workers of the merged entity’s South African operations.

Other investments include establishing a 400 million rand supplier development fund to invest in small businesses, a 200 million rand contribution to promote localisation and growth initiatives within the country and an innovation, research and development hub for the Africa region based in South Africa.

To address employment concerns in South Africa, the merging parties have agreed to maintain employee headcount for a period of five years following the merger and not to retrench any employees below specified managerial grades, it added.

At completion, HEINEKEN will contribute these acquired assets plus its 75% directly owned shareholding in HSA and certain other fully owned export operations in Africa, into an unlisted public holding company (referred to as Newco). HEINEKEN will own a minimum of 65% of Newco, with the remainder held by Distell shareholders who elect to reinvest.