COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 12/LM/Mar03
In the large merger between:
Tiger Brands Limited
and
Enterprise Foods (Pty) Ltd
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Reasons for Decision
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Approval
1. On 30 April 2003 the Tribunal unconditionally approved the merger
between Tiger Brands Limited and Enterprise Foods (Pty) Limited. The
reasons for this decision follow:
The transaction
2. Tiger Brands Limited (“Tiger Brands”) and Foodcorp (Pty) Ltd (“Foodcorp”)
currently jointly control Enterprise Foods (“Enterprise”). This transaction is
an acquisition by Tiger Brands of the remaining 50% shareholding in
Enterprise from Foodcorp (Pty) Ltd (“Foodcorp”).
The parties
3. The primary acquiring firm is Tiger Brands, a listed company with no
controlling shareholder.
4. The primary target firm is Enterprise, a jointly held subsidiary of Tiger
Brands and Foodcorp.
The rationale
(iv) The rationale for the transaction is that Foodcorp is
disposing all noncore business ventures while Tiger Brands,
on the other hand, is keen to have sole ownership and
management of the business.
Evaluating the merger
The relevant market
Product market
5. Tiger Brands and its various subsidiaries are involved in the production,
and distribution of various branded food products, beverages, consumer,
and, to a limited degree, pharmaceutical and critical care hospital
products.
6. Enterprise manufactures chilled processed meat and canned meat
products.
Firm Activity Examples of products/
Brand names
Tiger Brands and its
subsidiaries
(excluding Enterprise)
Production and
distribution of
various branded
food, consumer,
pharmaceutical
and critical care
products.
Albany bread
Ace maize meal
Beacon sweets
Fatties and Monies pasta
Jungle oats
Tastic rice
All Gold products
Koo canned products
Pharmaceutical products –
Corenza C; Panado, Syndol
Critical care products –
Sabax intravenous
solutions, Sepacell range of
speciality clotting products,
Biogel range of gloves.
Homecare products – Jeyes
Bloo
Baby care products – Purity,
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Elizabeth Annes.
Enterprise Manufacturing
chilled processed
meat and canned
meat products
Enterprise
Like it lean
Renown
Deli Select
Prima
Mieliekip
Franke
Top one
Bokkie
7. It is clear that save for Tiger Brands 50% share in Enterprise, the parties
are not involved in the same product markets. Since there is no product
market overlap, a definitive market definition is not required.
Impact on competition
8. The transaction merely represents an acquisition of sole control of
Enterprise. It will not result in any changes in the structure of the market or
an increase in market share. The merger does not present competition
concerns from a horizontal perspective.
9. Although there are no horizontal competition concerns, the Commission
further investigated the potential strengthening of the existing vertical
relationship between Enterprise and the Spar Group (“SPAR”), which is
also controlled by Tiger Brands.
Vertical integration
10. SPAR operates as a buying organisation and distributor to its own, and
member stores throughout SA. Enterprise supplies the SPAR distribution
centres with its chilled processed meat and canned meat products.
11. Most of the SPAR retail stores, save for six (6), are owned by individuals,
whom, the parties submit, may choose to buy products from the SPAR
distribution centres or from any other supplier.
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12. The following facts alleviated the Commission’s concerns:
i) verification that SPAR retailers are not obliged to purchase from the
SPAR distribution centres;
ii) confirmation that SPAR is one of Enterprise’s smaller customers,
thus without the custom of large retailers, Enterprise would not
survive;
(iii) the larger retailers exercise substantial countervailing power over
suppliers such as Enterprise, and
(iv) all major retailers compete with Spar at the local level. 1
The fact that the SPAR Group owns 6 retail stores does
not raise competition concerns.
13. We agree with the Commission’s finding that it is unlikely that the
strengthening of the vertical relationship between Enterprise and SPAR
will lead to customer or competitor foreclosure.
Public interest concerns
14. The parties submit that the worstcase scenario in terms of employment is
an estimated 92 job losses, out of a total of 1520, primarily “white” collar
employees in the administrative, marketing and sales functions.
Conclusion
15. The transaction represents a consolidation of Tiger Brands existing control
of Enterprise and it does not result in the exit of any firm or in the accretion
of market share. We conclude that it is unlikely that the merger will lead to
a substantial lessening of competition in the market. There are no pubic
interest issues, which affect this conclusion.
16. The transaction is therefore unconditionally approved.
10 June 2003
N. Manoim Date
Concurring: D Lewis, L Reyburn
1 The retail grocery market is a local market as defined and accepted in the Pick n Pay Retailers
(Pty) Ltd /Boxer Holdings (Pty) Ltd case no.52/LMJul02.
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For the merging parties: Edward Nathan Friedland.
For the Commission: J. Mokwana, J Liebenberg, Competition
Commission
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