COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 51/LM/Jul04
In the large merger between:
Clidet 500 (Pty) Limited
and
Ferro Enamels (Pty) Ltd,
Ferro Plastics (Pty) Ltd, and
Ferro Industrial Products (Pty) Limited
Reasons for Decision
Approval
1. On 18 August 2004 the Competition Tribunal unconditionally approved the
proposed transaction between the abovementioned parties in accordance with
section 16(2)(a) of the Competition Act 89 of 1998, as amended. The Tribunal’s
reasons for this decision follow.
The merging parties
2. The primary acquiring firm is Clidet 500 (Pty) Limited (“Clidet”), a newly formed
shelf company which has not traded yet.
3. The primary target firms are Ferro Enamels (Pty) Ltd (“FE”), Ferro Plastics (Pty)
Ltd (“FP”) and Ferro Industrial Products (Pty) Ltd (“FIP”).
4. According to the parties, Dysart Investment Company (Pty) Ltd (“Dysart”) and
Kenco Investments (Pty) Ltd (“Kenco”) hold 46.5% and 41.5% of the shares in FE
respectively. Dysart and the Case Family Trust hold 47.45% and 42.05% respective
shares in FP. The shares in FIP are held by Dysart and Kenco as to 51.7% and
45.8% respectively. Individuals hold the remaining shares in FE, FP and FIP. FIP
controls its wholly owned subsidiary Ferro Powder Coatings (Pty) Ltd which is not
trading at the moment.
The Merger Transaction
5. This transaction entails the acquisition (as one indivisible transaction and as going
concern) by Clidet of the businesses conducted by each of FE, FP and FIP. Post
merger, Clidet will own and control the businesses owned and controlled by FE, FP
and FIP. It is envisaged in the present transaction that Clidet would initially be
controlled by Investec, Mr Ian David Forbes (“Forbes”), and Mr Engelbert Arne
Davids (“Davids”) each holding 40%, 30% and 30% respectively.
6. It is intended that management and a BEE partner (not yet identified) will be
introduced as shareholders in Clidet and will therefore acquire certain shares in
Clidet respectively. The introduction of the BEE partner and management will thus
result in certain changes with regard to the shareholding in Clidet. 1
Rationale for the transaction
7. The parties stated that Laurence Ronald Tollemache and Kenneth John Phillip
Case through their investment companies Dysart and Kenco are selling their
business interests in FE, FP and FIP in that they wish to exit the businesses
conducted by the target firms. It appears to be an investment decision for Forbes and
Davids to hold shares in the target firms.
Evaluating the merger
The relevant market
Product market
8. As intimated above, Clidet is a newly formed entity, which has never traded.
9. Investec is a specialistbanking group providing a diverse range of financial
service products & services to a niche client base. Its activities include investment
banking, treasury & specialised finance, private client activities and asset
management. It appears that Investec does not provide any services or products that
compete with the target firms. The parties contended that none of these activities are
relevant for purposes of the present transaction. 2
10. Mr Forbes & Mr Davids do not conduct any other activity hence they do not
control any other firm.
11. FIP is involved in the manufacturing of powder coatings to customers in the
building, white goods & consumer products markets.
12. FP is engaged in the manufacturing & marketing of black & white Masterbatch
under licence from Ferro Corporation of the USA (“Ferro Corporation”). It is also the
under licence from Ferro Corporation of the USA (“Ferro Corporation”). It is also the
sole distributor in SA of polymer additives & speciality chemicals supplied by Ferro
Corporation.
13. FE is engaged in the marketing & production of ceramic & enamel products,
automotive glass pastes, flat glass decorative products & ceramic transfer papers
1 The Commission submitted that since the parties have not yet identified the BEE partner and
management, the present recommendation for approval covers only the acquisition by Investec, Davids
and Forbes through Clidet. Hence when the acquisition by the BEE partner and management kicks in
then such acquisition may be notifiable should there be a change of control in Clidet. The Tribunal
concurs with the Commission’s submission in this regard.
2 See pages 2930 of the record.
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also manufactured under licence from Ferro Corporation. 3
14. It is clear from the above that no overlaps exist insofar as the activities of the
merging parties are concerned. Investec, Forbes and Davids do not conduct any
activities competing with those of the target firms. The parties submitted that the
products in the Ferro Group could be broadly divided into three categories, i.e.,
specialty powder coatings (FIP), plastics (FP) and industrial coatings (FE). 4
Geographic market
15. The merging parties submitted that the Ferro Group operates throughout South
Africa, that is, in Gauteng, Free State, Natal and the Cape.
Impact on competition
16. In its investigation, the Commission found that no overlaps exist in the products
or services provided by the merging parties. As a result, we consider it unnecessary
to analyse the relevant market any further. The merging parties contended that this
transaction would not result in any increase in market concentration. There also
appears to be no significant barriers to entry in the market in which the target firms
operate. In addition, no vertical integration issues arise from the proposed
transaction.
17. We are persuaded that this transaction is unlikely to result in the substantial
lessening or prevention of competition in any relevant market/s.
Public interest issues
18. The transaction does not raise any public interest issues. The merging parties
intimated that the transaction would not have any impact on employment
whatsoever.5
Conclusion
19. We accordingly endorse the Commission’s recommendation that this transaction
is unlikely to result in the substantial lessening or prevention of competition. Hence
the proposed transaction is approved without conditions.
___________ 24 August 2004
David Lewis Date
Concurring: Norman Manoim and Thandi Orleyn
3 For the activities of all the target firms, please refer to the record (page 44).
4 See the Record (pages 1301310.
5 See page 135 of the record.
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For the merging parties: Natalie Browne (Cliffe Dekker Inc)
For the Commission: Khathija Ramathula ( Mergers & Acquisitions )
4