Lewis barred from retrenching in new merger – Tribunal

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Cape Town – The merger between furniture companies Lewis and United Furniture Outlets (UFO) has been granted by the Competition Tribunal, on condition that there are no merger-related retrenchments for the next two years. 

The ruling was made on Tuesday, following a hearing on January 10, 2018.

The matter was briefly allowed to stand down to give time for further submissions to be made by the South African Commercial Catering and Allied Workers Union’s (Saccawu), which was concerned that the merger would lead to retrenchments.

According to Saccawu, Lewis had been retrenching workers since December 2016. “Saccawu believes Lewis Stores embarked on the retrenchments in anticipation of the merger, as an attempt to reduce the duplication of functions once the transaction is concluded,” the Tribunal said.

Previously the Competition Commission concluded that retrenchments were unlikely to happen, but referred the matter to the Tribunal to make a final ruling.

No job losses 

“In order to ensure that there are no merger specific job losses following the merger, it was made a condition of the merger that the merging parties not make any merger related retrenchments for a period of two years post-implementation,” the Tribunal said.

The R320m merger, announced by Lewis in October 2017, will see the company acquire UFO in an effort to diversify its offering.

Lewis targets the lower-middle income market while UFO, which was established in 2004, is an independent, local cash furniture retailer with 30 stores. The company is recognised as a luxury brand, targeting the upper LSMs, such as 9 and 10+.

The merger would give Lewis a wider reach into new markets, Fin24 previously reported. Lewis, which mainly depends on credit sales, will increase its ratio of cash sales through the merger.

Both parties previously said that the merger would not lead to retrenchments as the UFO model is integrated into Lewis.

The merger comes into effect from February 1, 2018, Lewis said in a note to shareholders on Wednesday. 

Lewis' share price which opened at R24, increased 7.29% to R25.75 after the announcement. The share was trading at R25.08 by 13:35. 

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