COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 59/LM/Oct01
In the large merger between:
Clidet 323 (Pty) Ltd
and
MCG Industries (Pty) Ltd
_______________________________________________________________________
Reasons for Decision
_______________________________________________________________________
APPROVAL
On 28 November 2001 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Clidet 323 (Pty) Ltd and MCG Industries (Pty) Ltd
without conditions in terms of section 16(2)(a). The reasons for the approval of the
merger appear below.
The Parties
1. The Primary Acquiring firm is Clidet 323 (Pty) Ltd (“Clidet”), a special purpose
vehicle set up to house the investment of the current management of MCG
Industries (Pty) Ltd (“MCG”), RMB Ventures Two (Pty) Ltd (“RMBV2”) and
WIP Capital (Pty) Ltd (“WIP”) in MCG. Clidet is therefore the vehicle through
which Rand Merchant Bank (“RMB”) and WIP will acquire the business of
MCG.
2. RMBV2 is a subsidiary of First RandBank Holdings Limited and ultimately
controlled by FirstRand Limited (“FirstRand”). It holds several of FirstRand’s
private equity investments. FirstRand’s principal activities are retail and merchant
banking, private equity investing, insurance and asset management.
3. WIP is a black empowerment company which provides specialized financial
services including corporate finance advisory services, debt products advisory
services, derivative structuring, asset management, equity and bond broking,
treasury outsourcing and private equity fund management. WIP and RMBV2 each
hold 50% in WIP Private Equity (Pty) Ltd (“WIP P/E”). Another WIP subsidiary
is WIP Capital One (Pty) Ltd (“WCO”), in which WIP holds 100% of the issued
share capital.
4. The Primary Target firm is MCG Industries (Pty) Ltd and Metal Closures Group
South Africa Limited (jointly referred to as “MCG”), who carry on business as
manufacturers of plastic and aluminium closures and injection moulded crates,
containers and chairs (“the MCG business”). MCG is ultimately controlled by
Wassall, a large UK conglomerate, and has been so since 1990, when it delisted
MCG from the Johannesburg Stock Exchange.
5. MCG manufactures plastic closures (utilised in the pharmaceutical, soft drinks
and mineral water industries); aluminium closures (used for sealing
pharmaceutical products, soft drinks, liquor and specific grocery items); crates
(designed for different industries, such as, inter alia, the wine, soft drink, beer and
dairy industries); containers or materials handling (utilized for fruit storage and
distribution, agricultural, bread trays, chicken crates); chairs (ranging from heavy
duty chairs to stadium seats).
6. MCG will obviously supply these products to the above industries, its main
customers being SA Breweries, Distell, Stellenbosch Vineyards and CocaCola
bottlers, such as A.B.I.
Rationale for the Merger
7. The underlying rationale for the merger is that Zumtobel A.G., an Austrianbased
lighting group, acquired Wassall in April 2000. MCG is being sold to Clidet
since, as a packaging company, it is a noncore business entity to Zumtobel’s
lighting business.
The merger transaction
8. This is a private equity investment whereby RMB and WIP are acquiring the
business of MCG through Clidet, the special purpose vehicle. This is being
effected in two stages:
a. MCG will sell its manufacturing business of plastic and aluminium and
injection moulded crates, containers and chairs to RMB as a going
concern.
concern.
b. RMB will immediately onsell the MCG business as a going concern to
Clidet 323.
9. The consideration payable in respect of both sales will be identical.
10. Postmerger, the business will be owned and conducted by Clidet 323, who will
be owned by management, WIP and FirstRand. RMB will provide banking
facilities to MCG which will be priced on an arm’s length basis and will oversee
the performance of the investment in MCG:
Post Merger Structure
EVALUATING THE MERGER
11. Based on the information supplied to us by the parties, there is no product
overlap between the products/services provided by the merging parties . The
parties assure that neither WIP nor RMB have any subsidiaries or other private
equity investments in any packaging, metal closures or other similar business to
that carried out by MCG, nor do they have any holdings in any of MCG’s
competitors.
Share incentive
Trust
Management RMBV2 WIP
25% 34.9%%
5% 34.9%
CLIDET
100%
MCG BUSINESS
Public Interest Considerations
12. The merger will have no negative effect on employment. The parties maintain
that positive empowerment opportunities will arise from the merger because
WIP is a black economic empowerment company and there are opportunities for
such appointments to the board of Clidet. WIP and WIP P/E will collectively be
entitled to appoint 5 of the 11 directors to the Board.
CONCLUSION
The Tribunal accordingly endorses the Commission’s view that this merger will not
substantially lessen or prevent competition in any market and therefore approves it
unconditionally.
_____________ 3 December 2001
D.H. Lewis Date
Concurring: N. Manoim, P. Maponya