By Jaco Fraser – Associate | Commercial
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Agricultural businesses are often built over generations. When a farm, farming operation, packhouse or Agri-processing business is sold, consolidated or restructured, competition law considerations should be addressed prior to the signing of the transactional agreements or implementation thereof.
A transaction does not fall outside the scope of the Competition Act merely because it involves a “farm”. The relevant considerations are whether there is a resulting change of control and whether the applicable competition law thresholds are met.
A merger may arise where a party obtains direct or indirect control, which can include:
- acquisition of shares or assets;
- acquiring control over a farming or processing business;
- obtaining rights to appoint or veto directors;
- acquiring veto rights or other rights that allow it to materially influence the business; or
- consolidating previously separate farming, distribution or processing operations.
Accordingly, a transaction may therefore be notifiable even where less than 50% of the issued share capital is acquired, or where the transaction is characterised commercially as an internal restructuring.
With effect from 1 May 2026, the new merger thresholds are:
- Intermediate Merger: combined turnover or asset value of at least R1 billion, and target turnover or asset value of at least R200 million; and
- Large Merger: combined turnover or asset value of at least R9.5 billion, and target turnover or asset value of at least R280 million.
The applicable financial thresholds are assessed by considering the relevant acquiring group and target business. It is therefore not sufficient to solely consider the purchase price or the turnover of the farming enterprise being acquired.
What if the transaction falls below the thresholds?
A transaction below the intermediate threshold is generally a small merger and not subject to mandatory notification. It is not, however, automatically risk-free.
The Competition Commission (“Commission”) may require the merging parties to notify a small merger within six months after implementation if it may substantially prevent or lessen competition. Parties should also consider the Commission’s small-merger guidelines, particularly where a large agricultural group is acquiring a smaller farming, distribution or processing business.
Practical issues for farming families and agri-business owners:
Before signing a sale agreement or implementing a restructuring, parties should:
- Confirm whether there is a change of control
Review shareholding, board rights, veto rights and any rights that may amount to material influence.
- Calculate the thresholds properly
Use the relevant turnover and asset values of the target business and the entire acquiring group.
- Check whether the transaction is genuinely internal
Changes to the rights of outside shareholders may result in a merger, even where the transaction is described as a group restructure.
- Identify overlapping activities
Consider whether the parties operate in the same farming, supply, distribution, processing or retail markets.
- Build clearance into the transaction timetable
An intermediate or large merger may not be implemented before approval from the Commission is obtained.
- Record the position in the transaction documents
The transactional agreements should deal with whether notification is required, who bears the filing costs, who must provide which information, and what happens if approval is delayed or subject to conditions.
What are the consequences of getting it wrong?
Implementing a notifiable merger without the required approval may result in the transaction being prohibited from proceeding, unwound or subjected to remedial conditions. The parties may also face an administrative penalty of up to 10% of a business’s annual turnover, depending on the circumstances.
The safest approach is to obtain a competition law assessment before signing the sale agreement, transferring shares or assets, changing control of the business, implementing new governance arrangements or integrating the businesses.
An early assessment can confirm whether the transaction is notifiable, whether a small-merger filing should be considered, and what information will be required. It is usually far easier to deal with competition-law issues before implementation than after the Commission has raised concerns.
For farming families and agri-business owners, competition-law clearance should be treated as part of the transaction planning process, alongside tax, finance, due diligence and corporate structuring.