COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 73/LM/Dec03
In the larger merger between:
Cool Ideas 262 (Pty) Limited
and
Crossroads (Pty) Ltd and others
Reasons for decision
Approval
1. On 21 January 2004, the Competition Tribunal issued a Merger Clearance
Certificate approving unconditionally the merger between Cool Ideas 252
(Pty) Ltd (“Cool Ideas”) and Crossroads Distribution (Pty) Ltd
(“Crossroads”) as well as its subsidiaries. The reasons for our decision
follow.
The parties
2. The primary acquiring firm is Cool Ideas , a dormant company, which has to
date, not traded.
3. The primary target firm is Crossroads and its nine subsidiaries. 1
Communtiy Investments Holdings, Crossroad Distribution Group and
Crossroads Holdings hold the target firm.
Merger transaction
Structure
4. The proposed transaction basically entails a management buyout where
the primary acquiring firm acquires:
the business comprising of assets and certain liabilities in Crossroads;
all shares in and claims on loan account against Cross Country, Cross
1 Its subsidiaries comprise Cool Ideas 264 (Pty) Ltd, Cross Country Express (Pty) Ltd, Crosscape
Express (Pty) Ltd, Independent Express (Pty) Ltd, Jowells Cape Transport (Pty) Ltd, Jowells Garage &
Transport (Pty) Ltd, Namakwaland Lugdiens (Pty) Ltd, Skynet Worldwide Express (Pty) Ltd, and
United Parcel Services (Pty) Ltd.
Cape, Independent Express, Jowells Cape, Jowells Garage,
Namakwaland, Skynet and United Parcel (“the subsidiaries”).
75% of the shares in and claims on loan account against Cool Ideas
264; and
all Crossroads shares in and claims on loan accounts against
Crossroads Distribution Properties (Pty) Ltd and in other businesses in
neighbouring countries 2.
5. On completion of this transaction, the merged entity will be owned as to
60% by Tresso Trading 607 (Pty) Ltd (“Tresso”) 3 and the remaining 40% by
Nedcor Investments (Pty) Ltd. It is envisaged in the parties’ shareholders
agreement that Tresso Trading and Nedcor Investments will jointly control the
merged entity. The shareholding in Tresso is held as to 58,34% by Lorpez
Developments (Pty) Ltd (“Lorpez Developments”) 4 and as to 41,66% by a
consortium comprised of a number of individuals, i.e. the existing
management of Crossroads 5.
Rationale
6. The rationale is twofold:
Firstly, the parties seek through this transaction to afford certain shareholders
the opportunity to exit their investments in Crossroads.
Secondly, to allow the existing management together with the black economic
empowerment shareholders in the target firms to increase their shareholding
in Crossroads, and avoid the business of Crossroads being disposed of in its
entirety.
Activities of the parties
7. Cool Ideas is a dormant company and has not traded as yet. Similarly,
Tresso is dormant and has to date not traded.
8. Nedcor Investments is an investment holding company for all investments
made by the private equity division of the Capital Markets Division of Nedbank
Corporate.
2 They are Stuarts Transport Botswana (Pty) Ltd, Stuarts Transport (Namibia) (Pty) Ltd, Jowells
Transport (Namibia) (Pty) Ltd and Trek Transport (Pty) Ltd.
3 According to the parties, Tresso is indirectly controlled by Community Investments Holdings, which
holds the entire issued share capital in Lorpez Developments (see page 303 of the record).
4 The parties state that Lorpez Developments is a wholly owned subsidiary of Community Investments
Holdings (Pty) Ltd, which is a broad based black empowerment company that is wholly owned by
trusts, the beneficiaries of which are previously disadvantaged individuals.
5 See page 597 of the record.
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9. Apart form their proposed shareholding in the primary acquiring firm,
Tresso and Nedcor Investments do not sell or provide any product/s or
services identical to that of the primary target firms (as discussed hereunder).
Neither do they have direct or indirect control over any firms in the Republic of
South Africa in the courier, transport, logistics and motor industries. 6
The primary target firms
10. Crossroads is an all service offering company comprised of four main
divisions 7involved in the courier, transport, logistics and motor industries.
Skynet Worldwide Express is involved in the courier business in both
national and international markets.
Crosscape Express is involved in express road freight distribution
business.
The Full Truckload Division operates a heavy freight transport business
under the trade names of Cool Ideas 264, Jowells Transport and
Stuarts Transport.
The Motor Division operates a new and used vehicle and vehicle parts
sale business in the Northern Cape and Southern Namibia.
The relevant market
11. In its analysis of the relevant product market, the Commission found that
no product overlap exists between the products or services provided by Cool
Ideas and Crossroads. As indicated above, Cool Ideas and Tresso are
dormant companies, which have not yet traded. Similarly, Nedcor stated that it
does not have any direct or indirect control over any firms in the Republic of
South Africa in the courier, transport, logistics and motor industries.
12. For this reason the Commission did not consider it necessary to define
what the relevant markets were. In the parties’ view, the relevant product
markets are the courier, express road freight, heavy freight transport, and
motor sales and parts.
Competitive effect of this transaction
13. It appears from the above that no overlap exists between the activities of
13. It appears from the above that no overlap exists between the activities of
the merging parties. Similarly, no vertical integration concerns arise from this
transaction.
Public interest considerations
14. According to the parties, no impact on employment is envisaged thereof.
In addition, the trade unions at the primary target firms have given this merger
6 See page 608 of the record).
7 The parties indicated at the hearing that these four businesses would continue to be run as a group.
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a go ahead.
Conclusion
15. Based upon the above findings, we conclude that this transaction is
unlikely to substantially lessen or prevent competition in any of the relevant
markets, and accordingly approve it unconditionally.
______________ 04 February 2004
D. Lewis DATE
Concurring: N. Manoim, P. Maponya
For the merging parties: Mr Craig Roelofsz and P. Botha, Fluxmans
Attorneys.
For the Commission: Mr Horace Shozi assisted by Ms. Lizel Blignaut,
Competition Commission
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