UK headquartered manufacturer–Unilever Overseas Holdings B.V has gotten a major boost in its quest to expand its portfolio in Kenya and the East Africa region.
This follows the approval by the Competition Authority of Kenya (CAK) to acquire a majority stake (90%) in Chemi & Cotex Kenya Limited, a subsidiary of Tanzania’s Chemi and Cotex Industries Limited.
The firm is involved in the distribution of cosmetics, beauty, hair, oral care products and food products, one of East Africa’s leading fast moving consumer goods companies
Unilever Overseas Holdings B.V (Unilever B.V) on the other hand, is a wholly owned subsidiary of Unilever Plc which is listed on the London Stock Exchange and the New York Stock Exchange.
With the approval, Unilever will now move to assume direct control of the investment company and indirect control over Chemi & Cotex Kenya Limited.
The parties’ combined and relevant turnover for the preceding year was over Sh1 billion ($9.7million)
Unilever B.V, through entities it controls in Kenya, is involved in the distribution of skin, hair, and oral care and food products. The parties’ activities overlap in the distribution of skin, hair and oral care products.
“The transaction therefore qualified as a merger,” CAK said in its determinations announced this week, “They met the threshold for full merger analysis as provided in the merger threshold guidelines.”
The move now puts Unilever Overseas Holdings at a strategic position to grow its market share in Kenya and the East Africa region where through its subsidiaries, it provides food, drink, personal care, and home related products.
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The approval comes after an analysis of the market, the authority has said, where the two supply their product throughout the local market.
In Kenya, the two mainly deal with hair care products which constitutes braid sprays, vibrant sheen, shampoo, and relaxer hair food.
Unilever deals in the Tressa brand of hair care products while Chemi & Cotex Kenya Limited produces shampoos, conditioners and gel under the Suave and Alberto Balsam brands..
The market is however dominated by Haco, L’Oréal East Africa Limited and PZ Cussons whom aggregately control approximately 72 per cent, according to intelligence and market analysis firm –Euromonitor.
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Pre-merger, Unilever B.V’s market share is 1.1 per cent while Chemi & Cotex Kenya market share is below one per cent (1%).
The merged entity will have a market share of less than two per cent (2%) in the market for hair care products.
In the oral care segment, Colgate is the market leader with a 62 per cent market share. GlaxoSmithKline Plc (GSK) and Unilever each control 12 per cent of the market while Chemi & Cotex has a market share of five per cent(5%).
Therefore, the merged entity will have a market share of 17 per cent.
The products in this market include, but are not limited to, toothbrushes, toothpaste, dental floss, dental picks and sticks, oral irrigators, teeth whiteners, mouthwash and tongue scrapers, among others.
Unilever produces toothpaste and toothbrushes under the Close-Up and Pepsodent brands while Chemi & Cotex produces the White Dent toothpaste, a leading brand in Tanzania used by more than 20 million people.
Skin care products include cream, glycerine, lotions and petroleum jelly, among others.
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Chemi & Cotex Kenya Limited deals in brands such as Bodyline Baby Soft Skin Glow Siri, U & Me, Lovely, and Bannister.
Unilever on the other hand produces Vaseline, Geisha, Dove, and St.Ives brands.
Market data indicates that the Unilever Group is the market leader with 19 per cent while Chemi & Cotex ‘s market share is below one per cent(1%).
“The merged entity, therefore, will have a post-merger market share of below 20 per cent,” CAK notes, which will not threaten competition.
Other players in the market include Beiersdorf (14%), Canon (11%), Nice & Lovely (11%), and TCI (K) Ltd (8%) among others.
“From the analysis of the three product markets, the merged entity’s anticipated market share, and that of competitor firms, the authority is of the view that the proposed transaction is unlikely to lead to a substantial lessening or prevention of competition,” the competition body noted.
Additionally, the transaction is unlikely to lead to any negative public interest concerns.
Public interest concerns that the authority considers during merger analysis include the extent to which a proposed merger would impact employment opportunities, impact on competitiveness of small and medium enterprises (SMEs), impact on particular industries or sectors and impact on the ability of national industries to compete in international markets.
Unilever has noted that the proposed transaction “will enable it expand its product offering and footprint, having a positive impact on employment opportunities.”
“Premised on the fact that the proposed merger is unlikely to lead to a substantial lessening or prevention of competition and that it also unlikely to raise public interest issues, the authority approved the proposed acquisition of 90 per cent of the issued share capital of Chemi & Cotex Kenya Limited,” CAK director general Wang’ombe Kariuki said.
The approval has however been granted on condition that Unilever continues providing Chemi & Cotex’s products (Whitedent, Bodyline, Baby Soft, Skin Glow, Siri, U & Me, Lovely, Bannister and Tressa) in the market for at least three years upon conclusion of the transaction.