Bid Industrial Holdings (Pty) Limited and G. Fox & Company (Pty) Limited (58/LM/Aug04) [2004] ZACT 64; [2004] 2 CPLR 275 (CT) (13 October 2004)

70 Reportability
Competition Law

Brief Summary

Competition Law — Merger Approval — Bid Industrial Holdings (Pty) Ltd and G. Fox & Company (Pty) Ltd — Competition Tribunal approving the merger unconditionally — Bid Industrial, a subsidiary of Bidvest, acquiring G. Fox, a company engaged in the wholesale and retail of industrial products — Concerns raised regarding potential retrenchments of G. Fox employees — Merging parties provided an undertaking not to retrench unionised employees for 18 months post-merger — Tribunal finding no substantial lessening of competition and approving the merger.

COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
                                                                                                Case No.: 58/LM/Aug04
In the large merger between:
Bid Industrial Holdings (Pty) Limited 
and
G. Fox & Company (Pty) Limited
                                                       Reasons for Decision
Approval
1.   On   22   September   2004   the   Competition   Tribunal   issued   a   Merger   Clearance  
Certificate   approving   unconditionally   the   merger   between   Bid   Industrial   Holdings  
(Pty) Ltd (“Bid Industrial”) and G. Fox & Company (Pty) Ltd (“G. Fox”). The reasons  
for our decision follow.
The merging parties
2.   The   primary   acquiring   firm   is   Bid   Industrial ,   a   subsidiary   of   Bidvest,   an  
international investment holding company listed on the JSE.  
 3. The primary target firm is  G. Fox, a private company controlled by Mr David  
Rubenstein.   G.   Fox   controls   and   owns   46%   in   Siki   Fox   Properties   (Pty)   Ltd  
(“Siki”) and 100% in G. Fox Properties (Pty) Ltd (“Fox Properties”) and Globe  
Foundry (Pty) Ltd (“Globe Foundry”). 
The Merger Transaction
4. This transaction entails the acquisition by Bid Industrial of the business of G. Fox  
as a going concern and by the Bidvest Group Ltd (“Bidvest”) of the shares in Siki,  
Fox Properties  and the Globe Foundry from G. Fox. Post­transaction, Bid Industrial  
will   own   and   control   the   business   of   G.   Fox   whilst   Bidvest   will   own   100%   of   the  
shares in the abovementioned property companies and in Globe Foundry. 
                                                                              
Rationale for the transaction
5. The parties stated that the sole controller of G. Fox, Mr David Rubenstein, (who  
seems   to   have   no   successor),   intends   to   retire.   Bidvest   (already   active   in   similar  
markets as G. Fox) sees the target firm as an attractive opportunity which will be

markets as G. Fox) sees the target firm as an attractive opportunity which will be  
supported by Bidvest’s superior management skills and growth opportunities. 
The activities of the merging parties

The primary acquiring firm
6.   Bidvest   is   a   diversified   industrial   group   operating   in   the   fields   of   Services,  
Distribution and Trading. All of its activities fall under 3 umbrella divisions: Services,
Commercial Products and Food Services. 
7.  Bidserve is the operating unit within the Services Division of Bidvest. It operates in  
the  markets  of   supplying,   cleaning,   laundry,   hygiene,   security  and  staff   facilitation  
services as well as janitorial products and industrial workwear. It operates through  
several   divisions   such   as   Steiner   Hygiene   involved   in   washroom   hygiene   and  
Prestige Group which is involved in cleaning and specialised services. The business  
activities   of   Commercial   Sundries   Supplies   (Pty)  Ltd  (“Commercial   Sundries”)   and  
Clockwork   Clothing   (incorporating   Admiral   Sportswear)   (Pty)   Ltd   (“Clockwork  
Clothing”) seem relevant for purposes of evaluating the present transaction.
The primary target firm
8. G. Fox is a commodity based wholesale and retail business selling the following  
category of products to corporations and industrial re­sellers and to individuals and a  
limited amount to retailers like Pick ‘n Pay. 
Rags: ­ these include the sale of various grades of cleaning and wiper rags which  
include cotton waste, coloured rags, white rags and mutton cloth.
Industrial Protective Clothing : ­ these covers the sale of a variety of industrial clothing  
such as overalls, contisuits, dustcoats, office jackets and chefs clothing; and safety  
shoes, gumboots and safety equipment such as head protection, hearing protection,  
eye   and   face   protection   and   respiration   protection   and   industrial   gloves   including  
chrome leatherwork gloves and PVC acid resistant gloves.  
Disposable   Tissue   and   Paper   Products :   ­   includes   the   sale   of   towel   and   tissue  
dispensers. 
Industrial   Chemical   and   Cleaning   Products :   ­   these   embrace   the   sale   of   hand

cleaners,   degreasers,   detergents,   disinfectants,   deodorants,   polish   and   industrial  
soap.
Miscellaneous Products : ­ includes the sale of janitorial products such as industrial  
brushware, feather dusters, paintbrushes and rollers, cleaning solvents, packs of tea/
coffee.       
Relevant market
Product market 
9. There exists an overlap in the merging parties’ products because both parties are  
engaged   in   the   sale   of   the   following   broad   product   categories 1  to   industrial  
1  There appears to be no overlap between the rags manufacturing businesses of G. Fox and any  
businesses within Bidvest.
2

customers2: 
 Disposable tissue and paper products;
 Industrial chemical and cleaning products;
 Industrial protective clothing: overalls;
 Safety shoes, gloves and safety equipment; and
 Janitorial products. 
Geographic market
10. The parties indicated that all the products listed above are sold to the industrial  
market   and   not   through   retail   channels.   It   appears   that   merging   parties   sell   their  
products nationally, but a large portion of G. Fox’s business is derived in Gauteng. As  
a result, the Commission considered the impact of the merger in Gauteng, but did not  
conclude on the relevant product and geographic market definition.  
Impact on competition 
Horizontal analysis
11.   The   parties   have   submitted   an   estimate   of   market   shares   in   respect   of   each  
broad category for the Gauteng and national geographic markets as well as that of  
their   competitors.   Below   is   a   table,   which   depicts   an   estimated   combined   post­
merger market shares of the merging parties at these two levels. 
Product Categories  National Market Shares  Market   Shares   in  
Gauteng 
Disposable   tissue   and  
paper products 
5.44% 6.79%
Industrial   chemical   and  
cleaning products 
3.90% 4.87%
Industrial   protective  
clothing: overalls 
7.96% 13.19%
Safety   shoes,   gloves   and  
safety equipment 
0.03% 4.71%
Janitorial products  5.69% 7.5%
12.   It   is   the   Commission’s   contention   that   the   above   market   shares   are   low   and  
unlikely  to raise competition concerns in the relevant   markets.  In the   first  product  
category, the largest competitors are  Kimberley Clarke  and  Nampak with more than  
30% each at both levels. In addition, there are other players in this market such as  
Green Tissue, Coral Tissue and Highveld Tissue. 
13.  Diversey   Lever   is   perceived   as   a   large   competitor   in   the   industrial   chemical

cleaning   market.   There   are   also   several   other   smaller   players   operating   in   this  
market. 
14. There are a number of firms competing with the merging parties in the industrial  
clothing market. This market appears to be very competitive with certain customers  
2  The Commission did not focus on customer segments because both parties supply customers that  
purchase the products for use in their own businesses or on­sell to corporate clients. 
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having indicated to the Commission that they have switched between the suppliers  
and could continue doing so post­merger. 
15.   The   Commission’s   investigation   in   the   safety   shoes,   gloves   and   equipment  
category  revealed   that   the   merging   parties   are   very   small   players   and   could   not  
obtain any market power with their combined post­merger market shares. There also  
appears to be a number of players competing with the merged entity. It was found  
that in the   janitorial products category   too there are a number of players who can  
constrain the merged entity should it behave anti­competitively. 3       
Vertical analysis
16. The parties appear to be vertically integrated as they source certain goods from  
each   other.   This   is,   however,   a   pre­existing   customer­supplier   relationship.   The  
parties   pointed   out   that   Bidvest   purchases   bathroom   fresheners,   masking   and  
packaging tape, wire ties and cutting machines and accessories from G. Fox. G. Fox  
purchases   various   grades   of   rags,   different   categories   of   overalls   and   detergents  
from Bidvest. 4  The Commission considered the level of purchases made between  
the parties. 
17. The Commission examined these relationships and found that neither party is a  
significant customer of the other.
18. In light of the facts set out above, it is unlikely for the merged entity to self­deal to  
exclude other customers post­transaction.   
Public Interest Concerns
19.   SACTWU   raised   concerns   with   regard   to   the   impact   of   the   merger   on   the  
continued employment of G. Fox’s employees subsequent to the merger. This trade  
union’s concerns emanated from the absence of a firm commitment from the merging  
parties   with   regard   to   possible   retrenchments  arising   from   the   merger.   The   union  
indicated that in the absence of a firm commitment, the merged entity would be free

indicated that in the absence of a firm commitment, the merged entity would be free  
to retrench employees after the competition authorities’ approval of this transaction.  
Pursuant   to  this,   the  Commission   sought   some  commitment   from  the  parties  with  
regard to the employment issues raised. Consequently the merging parties gave an  
undertaking   that   no  unionised   employees   would   be  retrenched   for   a  period  of   18  
months from the effective date   as a result of the merger. Bid Industrial, however,  
emphasised that should unforeseen circumstances outside its control and unrelated  
to the merger occur (such as an unexpected downturn in the market in which G. Fox  
operates),   then   Bid   Industrial   will   be   required   to   take   such   action   (including  
retrenchments   if   required),   as   are   in   the   best   interests   of   the   business   so   as   to  
ensure the future viability and sustainability of the business. 5 It is the Commission’s  
view that the commitments given by the parties would alleviate the union’s concerns  
in this regard. 
3  For more info refer to the Record (Pages 30­35) and the Commission’s Report (Pages 5­6).
4  See the Record (Page 36).
5  See Page 2 (3 rd bottom last paragraph) of the Parties’ supplementary submissions to the Commission  
via a telefax dated 7 September 2004.
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20. On a day prior to the hearing of this matter, the trade union wrote us a letter  
requesting that this Tribunal approve the proposed merger only on condition that no  
retrenchments take place for a period of at least 24 months. The trade union did not  
make   any   oral   submissions   but   merely   asserts   that   its   letter   constitutes   a   formal  
submission to the hearing. From the face of it, there was nothing indicative of the fact  
that the merger itself would result in retrenchments of certain individuals. SACTWU  
too failed to  at least  show that the merger would lead to retrenchment of employees.  
In addition, the merging parties made an undertaking   in good faith   that they would  
not retrench unionised employees for a period of eighteen (18) months from the date  
of approval of this merger by the Competition Tribunal. We are of the view that this  
undertaking provides adequate protection especially since there is no evidence that  
any retrenchments will arise out of the merger.    
Conclusion
21. We agree with the Commission’s submission that this transaction is unlikely to  
result   in   the   substantial   lessening   or   prevention   of   competition.   We   accordingly  
approve this merger unconditionally.
 
___________                                                                                   13 October 2004
David Lewis                                                                                                 Date   
 Concurring:      Norman Manoim        and Thandi Orleyn   
For the merging parties:   Vani   Chetty   (Edward   Nathan   &   Friedland  
Corporate Law Advisers)  
For the Commission:  Martin van Hooven ( Mergers & Acquisitions )
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