COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 17/LM/Feb00
In the large merger between
AECI Coatings (Pty) Ltd
PPG Securities Industries Inc
and
AECI (Pty) Ltd
Reasons for the Competition Tribunal’s Decision
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 1 March
2000 approving the merger between AECI Coatings (Pty) Ltd, PPG Securities
Industries Inc and AECI (Pty) Ltd without conditions. The reasons for our
decision to approve the merger are set out below.
The merger transaction
The primary acquiring firm is AECI Coatings (Pty) Ltd (“Coatings”), a company
newly formed for the purposes of this merger. AECI Limited will own 80,1% of the
shares in AECI Coatings. AECI Limited is a subsidiary of Anglo South Africa (Pty)
Ltd. Anglo South Africa is controlled by Anglo American Corporation Limited,
which is in turn controlled by Anglo American plc.
PPG Industries Securities Inc. (“PPG”), a company incorporated in the USA, will
own 19,9% of the shares in AECI Coatings. PPG Industries Securities inc is
controlled by PPG Industries Inc, a company incorporated in the State of
Pennsylvania, USA.
The primary target firm is Dulux, a wholly owned subsidiary of AECI Limited.
In terms of the transaction, AECI Limited will transfer the technical paints
manufacturing assets of Dulux to AECI Coatings. PPG will license its
technological knowhow in the technical paints business to AECI Coatings in
return for equity.
Evaluating the merger
Dulux manufactures technical paints for the following sectors:
• the automotive original equipment manufacturing coating sector (used in
the automotive industry for painting vehicles),
• the automotive refinishing paints sector (used for car repairs and for
painting railway stock and commercial vehicles),
• industrial coatings sector (paints used for home appliances such as wood
finishes and other general uses).
The geographic market is South Africa.
The transaction amounts to no more than a restructuring of the parties
relationship with one another with respect to Dulux. AECI goes from being a sole
owner of the Dulux assets to a majority owner of AECI Coatings into which it will
transfer the technical paints business of Dulux. PPG goes from being a licensor
of Dulux to an owner of a minority equity stake in AECI Coatings although it
remains a licensor.
The sole question for evaluation is whether the changed status of PPG vis a vis
Dulux has any competitive effect in the industrial paints manufacturing market.
Although this market is already highly concentrated the transaction will not
adversely change this. PPG is not in the domestic manufacturing market and its
previous licensing relationship with AECI did not make it a likely entrant as an
independent competitor to Dulux.
The license agreement between Coatings and PPG is nonexclusive. PPG may
therefore license its technology to any other manufacturer. The license
therefore license its technology to any other manufacturer. The license
agreement between PPG and Coatings, furthermore, does not preclude PPG’s
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possible entry into the market in future.
Based on the above information, the Tribunal agrees with the Competition
Commission that this merger does not substantial prevent or lessen competition.
The merger, furthermore, does not raise public interest concerns since the
employees’ contracts of employment will be transferred to the new company,
Coatings, in terms of section 197 of the Labour Relations Act.
N.M. Manoim Date
Presiding member
Concurring: D. H Lewis and P.E. Maponya
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