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.
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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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