Datatec Limited and Affinity Logic Holdings (Pty) Ltd (73/LM/Oct02) [2002] ZACT 51 (9 September 2002)

COMPETITION TRIBUNAL 
REPUBLIC OF SOUTH AFRICA
     Case No: 73/LM/Oct02
In the large merger between: 
Datatec Limited
and
Affinity Logic Holdings  (Pty) Ltd
Reasons for Decision
_________________________________________________________________
APPROVAL
On   4   December   2002   the   Competition   Tribunal   issued   a   Merger   Clearance  
Certificate   approving   the   merger   between   Datatec   Limited   and   Affinity   Logic  
Holdings (Pty) Ltd  in terms of section 16(2)(a). The reasons for the approval of the  
merger appear below.
The Parties
i.The acquiring firm is Datatec Limited (“Datatec”), a JSE listed  
company.   It   is   an   international   networking   and   IT   services  
company with activities in North and South America, Africa,  
Asia and Europe. More than 96% of the revenue of Datatec is  
generated outside of South Africa.
2. Its subsidiaries are Westcon, Logical, Mason, Westcon AME, Affinity Logic  
(ALH)   and   RangeGate.   Only   Westcon   AME,   RangeGate   and   ALH   have  
operations in South Africa. 
3. The target firm is  Affinity Logic Holdings  (Pty) (“ALH”). The shareholding  
of ALH is set out in the diagram below. 1
The Merger Transaction
1  AHL controls Affinity Logic Management Services (Pty) Ltd, Affinity Logic (Pty) Ltd, Destiny Electronic  
Commerce (Pty) Ltd, Quickcut Pre Press Network, Instant Xposure (Pty) Ltd.

4. The   transaction   comprises   a   disposal   of   a   7.79%   interest   in   ALH   by  
Wooltru,   the   leading   retail   and   wholesale   group,   to   Datatec   which   will  
increase Datatec’s shareholding in ALH from 47.5% to 55.21%, thus giving  
it   a   majority   shareholding   in   the   company.   This   transaction   occurs   as   a  
result   of   the   disposal   by   Wooltru   of   its   shares   in   ALH   to   the   other  
shareholders of AHL, as part of Wooltru’s unbundling. Wooltru is disposing  
of its stake because ALH is a non­core part of its business.   The pre and  
post merger shareholdings are reflected below:
Pre­merger and  Post­merger  shareholdings in Affinity :­
 
The Relevant Market
6. Datatec’s   core   activity   is   networking   and   integrating   of   IT   systems.   The  
extent of these activities are distributed amongst its various subsidiaries:
 Westcon
Datatec has a 92.5% shareholding in Westcon. This is a global distributor of  
advanced   networking   and   connectivity   products   and   services,   such   as  
video­conferencing,   virtual   private   networks,   e­business,   wireless  
connectivity,  network security and convergence technology products.
 Logical
Wooltru Massmart Employees 
Share Trust
Datatec Marich Trust Affinity 
Management
35.55% 9.9% 5.17% 47.5% 2.37% 1.96%
0% 11.85% 6.02% 55.21% 2.76% 24.16%
Affinity Logic Holdings (ALH)

A wholly owned subsidiary, Logical is an international professional services  
and   IT   network   integration   company.   It   provides   expertise   in   next­
generation technologies, such as IP telephony.
 Mason
Datatec   has   a   75%   shareholding   in   this   company,   which   is   a   strategic  
telecommunications consultancy.
 Westcon AME (Africa Middle East) (operates in South Africa)
Distributor of networking equipment, cabling products and security data and  
voice   communications   products.   It   distributes   products   to   resellers   of  
networking technology in the security, wireless and voice­over­IP markets.  
 RangeGate (operates in South Africa)
RangeGate is 76% owned by Datatec. A pioneer of mobile computing, it is  
a   mobile   technology   system   integration   company   which   sells   mobile  
solutions   into   specific   market   sectors   such   as   retail,   manufacturing,  
transport and logistics.
7. ALH’s   business   activities   are   focused   in   the   retail   and   consumer   goods  
industries and involve providing outsourced services for the delivery of IT  
infrastructure and application solutions to retail and consumer goods sector.  
This   includes   networks,   desktop   support,   network   design   and  
implementation   consulting.   It   provides   services   to   major   clients   such   as  
Dimension Data, Makro and Lever Ponds.
8. The  Commission  did   not   identify  a  product   or  geographical   overlap.   The  
parties referred to the relevant market as that for the supply of electronic  
value added trading systems and rendering of IT services. However, this is  
probably only the affected market, insofar as there is no product overlap.
Impact on competition
9. This transaction involves an increase of shareholding by Datatec in ALH. Its  
acquisition of additional shares means that it will now control the company.  
There is no product overlap in respect of the Datatec subsidiaries carrying

There is no product overlap in respect of the Datatec subsidiaries carrying  
on   business   in   South   Africa   and   ALH.   Westcon   AME   and   ALH   are  
distinguished   insofar   as   the   former   distribute   networking   equipment   and

security   products   to   resellers,   whereas   the   latter   provides   outsourced  
services   to   end­users.   ALH   does   not   supply   goods   or   services   to   the  
Datatec group or vice versa. There are therefore no horizontal or vertical  
overlaps as far as the South African businesses are concerned.
Conclusion
We   conclude   that   the   merger   will   not   lead   to   a   substantial   lessening   of  
competition.     The   Tribunal   therefore   approves   the   transaction   unconditionally.  
There are no public interest concerns which would alter this conclusion.
_____________ 9 December 2002
N. Manoim    Date
Concurring: D.Lewis, U. Bhoola
For the merging parties:   Edward Nathan Friedland Attorneys 
For the Commission:  M. Sebothoma, I. Dhladhla, Competition Commission