Competition Commission approves merger between ZZ2 and Mphome

On 18 December, the Competition Commission of South Africa unconditionally approved the merger of ZZ2 to acquire Mphome.

The Commission found that the proposed transaction is unlikely to result in a substantial prevention or lessening of competition in any relevant markets. The Commission further found that the proposed transaction does not raise any public interest concerns.

Mphome is one of the subsidiaries owned and controlled by an American investment firm Criterion Africa Forestry Limited through the Africa Forestry Fund II. CAP, as it is formerly known in the industry, is a private equity fund manager owned by its employees and the Grantham Foundation for the ‘Protection of the Environment’.

It manages a portfolio of approximately 200,000 hectares of plantation and related conservation lands as well as 550,000 hectares of tropical forest concessions from Eswatini, Gabon, South Africa, Tanzania, and Uganda.

Mphome’s inland activities predominantly comprise of the supply of eucalyptus and pine saw logs, mining timber logs, eucalyptus pulpwood and pole logs.

The details of the merger are still sketchy at the moment with ZZ2 and CAP still to release and official statement. 

ZZ2 is a group of companies owned by the Van Zyl family in Limpopo. They have been involved in small forestry holding and sale of timber from its eucalyptus and pine plantations.

Since 2019, ZZ2 has been partnering with Mphome to develop the 6 400 hectares eucalyptus and pine plantation for “higher and better use of select portions of the land to produce high value agriculture products for export.”

ZZ2 merger with Mphome is seen as a catalyst to improve timber production in Limpopo with CAP aiming to convert part of the plantations into tree orchards.

“The Fund’s strategy for the forestry areas is to create a high value asset under a mixed-use timber regime for diversified end markets.  Over time, the Fund expects to expand the forest area managed,” said CAP through Forestry SA newsletter.

According to the African Development Bank, the Africa Forestry Fund II was launched in 2010 and it is a US$150 million ‘second generation private equity fund’ focused on investing in sustainable forestry value chains in Sub-Saharan Africa. ASF II has three priorities namely; (a) rehabilitation of brownfield plantations in Africa to enhance productivity (including a selective use of forestry assets to grow high value agricultural products); (b) downstream manufacturing of high value wood products; and (c) biomass energy projects using wood waste to replace fossil fuels and enhance the overall portfolio value.

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