COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no: 04/LM/JAN04
In The Large Merger Between:
Bidvest Group Limited
And
McCarthy Limited
Reasons for Decision
Approval
1. On 04 February 2004 the Competition Tribunal issued a Merger Clearance Certificate
approving the transaction between Bidvest Group Limited and McCarthy Limited. The
reasons for this decision follow.
The Parties
2. The primary acquiring firm is Bidvest Group Limited (“Bidvest”), a public company, listed on
the Johannesburg Stock Exchange, under the Industrial Services Sector. Bidvest comprises
a group of companies involved in providing a wide range of services in South
Africa. Bidvest’s major shareholders are financial institutions including pension funds
insurance companies, unit and investment trusts, who own approximately 90% of Bidvest.
Its largest shareholder is Dinatla Investments Holdings (Pty) Ltd (“Dinatla”), an
empowerment consortium, which as of December 2003, owned 15% of Bidvest.
3. The primary target firm is McCarthy Limited (“McCarthy”), which is controlled (88,27%) by a
consortium of banks consisting of ABN AMRO Bank N.V, ABSA Bank Limited, Investec
Bank Limited, Nedbank Limited, FirstRand Bank Limited, Standard Bank of South Africa
Limited and Societe Generale.
The Transaction
4. The transaction, involves Bidvest acquiring the entire issued stated capital of McCarthy and
all the issued preference shares in the share capital of McCarthy. The transaction will be
implemented either by way of a scheme of arrangement in terms of the Companies Act 1;
section 311 (compromise and arrangement between company, its members and creditors)
1 Act 61 of 1973
or by invoking the provisions of Section 440K (Compulsory acquisition of securities of
minority in affected transaction).
Rationale
5. The consortium of banks that currently controls McCarthy has been looking for an
opportunity to exit on favourable terms. From Bidvest’s perspective it will be provided with
an opportunity to enter into a major industry and distribution business in which it is not
currently represented.
The Parties’ Activities
6. Bidvest, through various subsidiaries, provides a diverse range of business activities in
South Africa; from freight management to travel related financial services to supplying office
products to meat and food processing. The following is a summary of the services provided
by the various Bidvest subsidiaries:
• Bidfreight freight management;
• Bidserv Provision of a wide range of outsourcing activities, for example, security
and contract cleaning, laundry services etc;
• Caterplus Distribution of a wide range of products to catering and hospitality
business;
• Combined Foods Manufacturing and distribution of products to bakery, meat, food
industries;
• Rennies Financial Services provision of a wide range of services relating to travel
and foreign currency;
• Bid Corp Services provision of strategic direction and corporate services to Bidvest
Group;
• Bidpac provision of packaging closures, fastenings, strapping, stationery, adhesive
tape, coding and labels; and
• Bidoffice office products, for example, stationery, furniture, computers etc.
7. McCarthy is active primarily in the motor vehicle retailing industry, i.e. selling new and used
vehicles through various franchises and dealerships throughout South Africa. McCarthy is
also involved in financial services through its brokerage operation (McCarthy Insurance
Services) and a vehicle financing company (McCarthy Finance). Aside from this, McCarthy’s
other operations include a car rental service through Budget Rentacar, the auctioneering of
motor vehicles (Burchmores Car Auctions), corporate and commercial fleet management
(McCarthy Fleet services) and the importation and distribution of a wide range of Yamaha
products. McCarthy also has a loyalty programme, which inter alia entitles members to
benefits such as roadside assistance and medical rescue.
8. From the above, it is clear that there is no overlap in the activities of the merging parties.
2
Impact on competition
9. There are a number of vertical relationships that exist between the Bidvest group and
McCarthy, viz.:
9.1. Vehicles purchased from McCarthy by Bidvest;
9.2. Vehicle rental services provided by McCarthy (Budget Rentacar) to Bidvest;
9.3. Vehicle rental services purchased by Bidvest (Rennies) on behalf of third
parties from McCarthy (Budget);
9.4. Water cooler rentals, cleaning and sundry supplies provided by Bidvest
(Bidserve) to McCarthy);
9.5. Food products provided by Bidvest (Caterplus) to McCarthy;
9.6. Travel management services provided by Bidvest (Rennies) to McCarthy;
9.7. Office products provided by Bidvest (Bidoffice) to McCarthy; and
9.8. Vehicle servicing and repairs provided by McCarthy to Bidvest.
10. However, none of the above raises any significant competition concerns. With regard to the
carrental services, the parties claim that Rennies’ clients usually stipulate which supplier to
use. Where Rennies has discretion, they would normally use Budget. Budget has a market
share of 14% in the carrental market, and at the hearing submitted that even in the event
that Rennies used Budget exclusively, Budget’s share was unlikely to exceed 20%, since
Rennies only enjoys 15% of the Travel agent market.
11. The parties brought to the attention of the Tribunal, the fact that Avis Europe plc (“Avis
Europe”) owns the intellectual property rights for the use of the Budget trademark. 2
12. It is unclear from what little information we have at hand as to whether Avis Europe plc’s
power over the two competing franchises should give rise to any Competition concerns and
the Commission might want to look further at this. 3 However, this relationship between Avis
and Budget existed prior to the transaction and has no bearing on the competitive impact of
the present merger.
Conclusion
the present merger.
Conclusion
13. Having found that there is no overlap in the activities of the merging parties, there are no
significant vertical integration issues, we conclude that the merger will not lead to a
substantial lessening of competition and there are no significant public interest concerns.
Accordingly, we agree with the Commission’s recommendation that the transaction be
unconditionally approved.
11 February 2004
2 Avis Europe and Budget Rent–aCar International Inc. operate the Avis and Budget brands respectively
via franchise arrangements, namely as Avis South Africa and McCarthy Limited.
3 According to the parties, Avis South Africa has approximately 37% of the car rental market.
3
N Manoim Date
Concurring: D Lewis and U Bhoola
For the merging parties: Vani Chetty (Edward Nathan and Friedland)
For the Commission: Khathija Ramathula (Mergers and Acquisitions)
4