COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 88/LM/Dec02
In the large merger between:
Clidet No. 409 (Pty) Ltd
and
Dorbyl Engineering – a Division of Dorbyl
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Reasons for Decision
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Approval
On 11 December 2002 we unconditionally approved the merger between Clidet No 409
(Pty) Ltd (“Clidet”) and Dorbyl Engineering, a division of Dorbyl (“Dorbyl
Engineering”). The reasons for our decision follow.
The transaction
The transaction is essentially a management buyout of the engineering division of
Dorbyl, in terms of which Clidet No 409 Pty Ltd will acquire the business of the Dorbyl
engineering as a going concern.
The primary acquiring firm is Clidet, a special purpose vehicle, which will acquire the
business. The shareholders in Clidet will be DCD Investment Trust, Mvelaphanda
Investment Trust and ABSA Bank Limited.
The primary target firm is the Dorbyl Engineering Division of Dorbyl Limited, a public
company listed on the JSE Securities Exchange.
The parties state that the rationale for the transaction is the disposal of Dorbyl’s noncore
assets, they believe the division will best serve their requirements and its’ markets as a
standalone entity.
Evaluating the merger
The relevant market
Dorbyl Engineering operates in the heavy engineering, rail and ship repair industries and
comprises of three subdivisions active in these areas.
As a special purpose company, Clidet is not active in any business sector, and none of the
shareholders of Clidet have interests in any of the above sectors. Hence there is no
product overlap between the parties. The Commission therefore defined the market
broadly as the area of activity of the target firm, which we are satisfied with.
Effect on competition
The parties submitted market share information on the activities of the target firm. While
these market shares are relatively high, we note that the high barriers to entry, including
huge capital requirements and scarce infrastructure, are probably why these markets are
rather concentrated.
The parties submit that customers exercise considerable degree of countervailing power
since they are large concerns such as Anglo Platinum, Goldfields and Impala Platinum.
On the supply side ISCOR Vereeniging has significant countervailing power.
We accept that the transaction will not alter the structure of these markets.
Public interest Issues
The parties submit that there will be a maximum of 10 retrenchments in the middle to
upper staff levels. Two of the trade unions, UASA and NUMSA withdrew their
intentions to participate, reserving their rights.
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.
26 February 2003
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N. Manoim Date
Concurring: D. Lewis, M. Holden
For the merging parties: Cliffe Dekker Attorneys
For the Commission: L Mtanga, Legal Services Division, Competition
Commission
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