COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 85/LM/Dec02
In the large merger between:
Reutech Engineering Services (Pty) Ltd
and
ATC (Pty) Ltd
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Reasons for Decision
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Approval
On 19 December 2002 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Reutech Engineering Services (Pty)
Ltd and ATC (Pty) Ltd in terms of section 16(2)(a). The reasons for the approval
of the merger appear below.
The merger transaction
Reutech Engineering Services (Pty) Ltd (“Reutech”) who already owns 28.13% of
the shares in ATC (Pty) Ltd (“ATC”) is acquiring a further 50.87% of the shares in
ATC, which were previously held by Marconi Communications Africa (Pty) Ltd
(28.13%) and Associated Electrical Industries Limited (22.74%) 1. On completion
of the transaction Reutech will be the majority shareholder with approximately
79% shareholding in ATC.
Reutech, the primary acquiring company, is a dormant firm, which is wholly
owned by Reunert Ltd.
1 Associated Electrical Industries Ltd is controlled by Marconi Plc, a London company.
The current shareholders in ATC are Marconi Communications Africa (Pty) Ltd,
Associated Electrical Industries Ltd, Reutech Engineering Service (Pty) Ltd and
African Cables Ltd. 2
Rationale for the transaction
According to the parties ATC lost a major Telkom order at the end of 1999, which
resulted in significant retrenchments 3, apparently, because its empowerment
credentials were not in line with Telkom’s expectations. Due to ATC’s extremely
complex shareholding and the fact that existing shareholders did not want to
dilute their shareholding it was not possible to introduce a black empowerment
shareholder. However, all this will change after the transaction is completed
since the new shareholders intends to introduce a significant black empowerment
component.
The relevant product market
We agree with the Commission that there is no product overlap between the
merging parties.
As stated above, the acquiring firm is a dormant company held by Reunert, which
is engaged in the manufacture of electronics and lowvoltage electrical
engineering. ATC specialises in the manufacture of telecommunication cable for
public network operators such as Optical fiber, Optical fiber Cables and Copper
Cables.
Effect on competition
ATC sells its cables directly to Telkom, which is the only company
responsible for laying the cables used in the transmission of electrical
signals.4 Other players that also sell optical fiber communication cables to
Telkom are Aberdare and MTec. Aberdare also provides Telkom with
copper communication cables.
In light of the fact that the market structure will not change as a result of the
2 African Cables is a joint venture between Reunert Ltd (holding 49% of the shares) and Pirelli Spa
(holding 51% of the shares). African cables manufacture insulated electrical power cables.
(holding 51% of the shares). African cables manufacture insulated electrical power cables.
3 ATC’s fiber plant at that time was totally dependent on receiving work from Telkom.
4 The merger therefore does not raise any vertical integration concerns.
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transaction we find that the transaction will not significantly lessen or prevent
competition in the relevant market.
Public Interest Issues
No employment or other public interest issues arise as a consequence of the
transaction.
_____________ 20 December 2002
D. Lewis Date
Concurring: N.M. Manoim, M. Holden
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