COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 70/LM/Dec03
In the large merger between:
General Motors LAAM Holdings
and
Boco (Pty) Ltd
Reasons for Decision
_________________________________________________________________
APPROVAL
On 28 January 2004 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between General Motors LAAM Holdings and
Boco (Pty) Ltd in terms of section 16(2)(a). The reasons for the approval of the
merger appear below.
The Parties
1. The acquiring firm is General Motors LAAM Holdings LLC (“GM Laam”), a
Delaware corporation in Florida, USA. It’s a subsidiary of General Motors
Corporation in the US (“GM”)the ultimate controlling entity. Companies
forming part of the GM group include GM Plats (Pty) Ltd, Adam Opel and
SAAB. Its only subsidiary in RSA, GM Plats , acquires and sells platinum
group metals (“PGMs”) including rhodium, palladium and platinum.
2. The target firm is Boco (Pty) Ltd, (“Boco”), which controls Delta Motor
Corporation (Pty) Ltd (“Delta”). Boco is merely a private holding company
with respect to Delta. GM is the largest shareholder in Boco.
3. Delta is a wholly owned subsidiary of Boco. It is the former GMSA. IN 1986
GM disposed of its shares in GMSA to a management buyout group. Boco
was created as a holding company to faciliate the 1986 Disposal
Agreement. GM acquired 49% of Boco in 1997, retaining the option to
acquire the remaining shares. Delta is a licensee of GM with respect to
Opel Corsa and Astra passenger cars in RSA.
The Merger Transaction
4. The transaction comprises the acquisition of 51% of Boco by GM, to take
their existing 49% to 100%. Postmerger, Boco, including its subsidiaries,
will become a subsidiary of GM.
Merger Rationale
5. GM wants to reenter SA motor vehicle industry again after it withdrew in
1986 due to economic and political sanctions. They would like to augment
their product and service range in RSA and increase their exports from
South Africa. Delta is in turn promised access to international markets and
procurement advantages.
The Relevant Market
6. GM, one of the largest motor manufacturers worldwide manufactures and
sells motor vehicles under the brands, Cadillac, Buick, Chevrolet, Saab,
Saturn, etc. In South Africa the only vehicles GM sells in the country, other
than through Delta, are Saab vehicles which are distributed by an
independent dealer network 1.
7. Delta’s subsidiaries include Delmot Properties (Pty) Ltd, DAD Holdings
Limited, Stainless Precision Components (Pty) Ltd, Precision Exhaust
Systems (Pty) Ltd, DMC Holdings, and Global Logistics Services (Pty) Ltd.
Its largest shareholder is GM.
8. Delta is the fifth largest automotive company in RSA with an approximately
11.5% share of the motor vehicle market. It has two assembly plants in PE.
It assembles supplies and sells the following motor vehicles:
• Isuzu pickups, recreational vehicles, medium and heavy trucks under
license from Isuzu Motors Limited, Japan and
• Opel Corsa, Astra passenger vehicles under License from GM’s subsidiary,
Adam Opel 2.
9. Delta also distributes Opel and Suzuki vehicles in RSA.
1 GM’s Chevrolet is to be relaunched in RSA and sold by Delta here.
2 Opel is a subsidiary of GM since 1929.
10. The activities of the other subsidiaries are not relevant to this transaction.
11. The overlap therefore occurs in that both GM and Delta manufacture,
assemble and supply motor vehicles in RSA (wholesale). In particular both
parties are directly involved in the passenger market and only Delta is
involved in the light, medium and heavy commercial vehicle markets.
Geographical Market
12. According to the Commission, this market is national since the parties’
motor vehicles are supplied nationally throughout RSA.
Impact on competition
Horizontal
Passenger Cars
13. The parties assert that the market shares of the merging parties for the
passenger car market as a whole is 7.55% (including Cadillac, Chevrolet,
Isuzu, Opel, Saab and Suzuki).
14. Therefore, in the passenger motor vehicle market, GM’s license to Delta to
assemble and distribute Opel and Astra cars will not change postmerger.
Furthermore, the market shares in the various segments are too small to
warrant concern. Accordingly there will be no material change in market
structure as a result of this transaction.
Commercial Cars
15. Similarly, in the light, medium and heavy commercial vehicle categories,
there will be no material change in market shares postmerger.
Vertical
16. GM Plats (GM Subsidiary) acquires and sells PGMs used in the production
of catalytic converters. PES (Delta Subsidiary) makes catalytic converters.
GM Plats therefore performs an intermediary function for General Motors
by applying PGM’s to a number of catalytic converters or manufacturers in
South Africa, one of them being Precision Exhaust Systems, a wholly
owned subsidiary of Delta.
17. However, GM Plats only supply PGMs for use as catalytic converters in GM
vehicles. GM Plats only supplies these PGM’s to companies that
manufacture for the GM group. So, any catalytic converter using PGM’s
from GM Plats ultimately finds its way into a GM vehicle. Therefore there is
no potential for rivals of GM to be foreclosed and no vertical concerns arise
as this aspect of GM’s business has always and will continue to stay within
the GM group.
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.
_____________ 10 February 2004
N. Manoim Date
Concurring: M. Holden, P. Maponya
For the merging parties: Bowman Gilfillan Attorneys
For the Commission: M. Mohlala and K. Ramathula, Competition
Commission