COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No.: 73/LM/Sep04
In the large merger between:
Clidet 517 (Pty) Limited
and
Giostra Investments (Pty) Limited
Reasons for Decision
Approval
1. The Competition Tribunal issued a Merger Clearance Certificate on 15 December
2004 approving without conditions the merger between the abovementioned merging
parties. The reasons for our decision follow.
Merging parties
2. The primary acquiring firm is Clidet 517 (Pty) Ltd (“Clidet 517”), a private
company duly incorporated under the company laws of the RSA. No single
shareholder is able to control the company nor does it have at present a
shareholders agreement. 1 Its shareholders are Mbube Holdings (Pty) Ltd (“Mbube”)
(48%); Nokaneng Trading (Pty) Ltd (“Nokaneng”) (32%); Limosa Investments 231
(Pty) Ltd (“Limosa”) (5%); MKMVA Investment Holdings (Pty) Ltd (“MKMVA”) (5%);
and PDI Employee Trust (“PDI Trust”) (10%).
3. The primary target firm is Giostra Investments (Pty) Ltd (“Giostra”), a private
company duly incorporated under the company laws of the RSA. Giostra is an
intermediary special purpose vehicle owned and controlled by IFS Consulting (Pty)
Ltd (“IFS Consulting”). IFS Consulting’s shareholders are Rovenlilac Investments
(Pty) Ltd, New Adventure Investments (Pty) Ltd (“New Adventure”) and Hispania
(Pty) Ltd (“Hispania”). 2
4. Other target firms are 6 private companies 3 all incorporated under the company
1 See page 2 of the transcript (“the transcript”) dated 15 December 2004.
2 IFS Consulting are the corporate advisors and facilitators of the proposed transaction. It is
controlled by its Managing Director (“MD”), Mr Chris Ransome (“Ransome”), both from an
controlled by its Managing Director (“MD”), Mr Chris Ransome (“Ransome”), both from an
operational (in his capacity as MD) and shareholding perspective as he controls New
Adventure and Hispania.
3 The target firms are DCD Dorbyl (Pty) Ltd (“Dorbyl”); Global Roofing Solutions (Pty) Ltd (“GRS”);
Midas Group (Pty) Ltd (“Midas”); Busaf Transport Products (Pty) Ltd (“Busaf”); Dynamic Fluid
Control (Pty) Ltd (“DFC”); and Kulungile Metals (Pty) Ltd (“Kulungile”).
laws of the RSA. All six of these entities were jointly controlled by ABSA prior to the
present transaction. The details of the six entities follow.
5. Dorbyl – Prior to the merger Dobyl’s shareholders were DCD Investment Trust
(“DCD Trust”) (55%), Mvelaphanda Investments Trust (“MIT”) (25%) and ABSA
(20%). Post merger they will be DCD Trust (55%); MIT (25%), and Clidet 517 (20%).
The shareholders’ agreement provides for joint control by all three shareholders.
Dorbyl4 also participates in joint ventures and associated companies. 5
6. GRS – prior to the transaction, ABSA and GRS Investment Trust held 55% and
45% of the shares in GRS respectively. Posttransaction, ABSA and GRS Investment
Trust sell 10% and 15% to Clidet 517 respectively, which would result in the following
shareholdings: Clidet 517 (25%); GRS Investment Trust (40%); and ABSA (35%). All
three shareholders would then become joint controllers.
7. Midas – Prior to the merger Midas’ shareholders were Midas Investment Trust
(24.9%); Clidet 472 (30%); Major Move 101 (Pty) Ltd (25%); ABSA (20%); and Midas
Ltd (0.1%). Post merger they will be Midas Investment Trust (24.9%); Clidet 472
(20%); Clidet 517 (30%); Major Move 101 (Pty) Ltd (25%); and Midas Ltd (0.1%).
According to the parties, material decisions would require consent of shareholders
holding 85% of the shares. 6
8. Busaf – prior to this transaction, both DTP Investment Trust and ABSA held 60%
and 40% shares respectively. Postmerger, ABSA would sell its 20% stake to Clidet
517. As a result, DTP Investment Trust, Clidet 517 and ABSA would hold 60%, 20%
and 20%of the shares respectively. We were advised that notwithstanding the fact
that the Trust owned a majority stake, the company was still the subject of joint
control.
9. DFC – Prior to the merger DFC’s shareholders were DWS Investment Trust (59%);
control.
9. DFC – Prior to the merger DFC’s shareholders were DWS Investment Trust (59%);
Kagiso Ventures Ltd (21%); and ABSA (20%). The postmerger shareholders are
DWS Investment Trust (“DWS Trust”) (45.5%); Kagiso Ventures Ltd (21%); and
ABSA (20%). Clidet 517 would hold the remaining 13.5% shares. Its control structure
is such that DWS Investment Trust, ABSA and Kagiso Ventures Ltd would post
merger become joint controllers.
10. Kulungile – Its premerger shareholders were DMT Investment Trust (“DMT
Trust”) (55%); Pamodzi Investment Holdings (Pty) Ltd (“Pamodzi”) (20%); and ABSA
(25%). According to the parties, ABSA and DMT Trust will sell their 10% and 9%
stakes in Kulungile to Clidet 517 respectively. Post merger they will be DMT Trust
(36%); Pamodzi (30%); Clidet 517 (19%); and ABSA (15%). All these 4 shareholders
would become joint controllers of Kulungile.
4 Dorbyl’s subsidiaries are Mine Support Products (Pty) Ltd; Express Model Trading 51 (Pty) Ltd;
Makana Dorbyl Engineering Projects (Pty) Ltd; DCD Engineering Holdings Ltd; Dorbyl Marine (Pty)
Ltd; Dorbyl Heavy Engineering (Pty) Ltd; and Dorbyl Engineering Management Company (Pty) Ltd.
5 These interests lie in Nautilus Marine (Pty) Ltd; Dormac Marine Engineering (Pty) Ltd; East London
Shipyard (Pty) Ltd; and Kraatz Marine (Pty) Ltd (Namibia).
6 See page 3 of the merging parties’ organogram (handed to the Tribunal at the hearing of this matter).
2
The merger transaction
11. The transaction unfolded in two stages. In the first leg, ABSA Bank, Clidet No.:
472 (Pty) LTD (“an investment company) and/or the three management trusts would
sell a portion of their shares in six target firms 7 to Giostra. The transfer of the
interests in the target firms to Giostra would be regulated by 8 agreements. 8
According to the Commission, the transaction in terms of which ProRoof Sheeting
(Pty) Ltd would have acquired ABSA’s remaining 15% in Kulungile (regulated by
Annexure B11) had fallen away. Further to the hearing, the merging parties advised
us that there was a call option under which Clidet 517 had the option to acquire
ABSA’s remaining 20% stake in Midas. Instead of acquiring the 10% stake in Midas,
in fact ABSA would acquire a 30% stake in Midas. 9
12. In the second leg, Giostra would on sell the shares it acquired in the first leg to
Clidet 517. The second leg would be regulated by the Sale of Shares Agreement and
Loan Accounts Agreement (“Sale Agreement”) concluded between Giostra and Clidet
517.10
13. The Public Investment Commissioners (“PIC”) had agreed to provide Clidet 517
with the funding required to purchase the shares.
Rationale for the transaction
14. Although the transaction appears complex and involves several transactions and
companies the rationale is quite straightforward. The target firms were all previously
part of the Dorbyl Group, a diversified engineering firm that has undergone extensive
restructuring. Part of that restructuring entailed ABSA acquiring a large stake in the
various target firms. ABSA now wants to reduce its exposure and has found a way to
do so by the creation of Clidet 517. The deal also means that the empowerment
credentials of the target firms are enhanced.
7 Footnote 3 supra.
8 During the first stage of the transaction, Giostra will acquire shares in the target firms as
follows:
In Dorbyl, Giostra will acquire 20% from Absa.
In GRS, Giostra will acquire 10% from Absa and 15% from GRS Trust.
In Midas, Giostra will acquire 30% from Clidet No 472.
In Busaf, Giostra will acquire 20% from Absa.
In DFC, Giostra will acquire 13.5% from DWS Trust.
In Kulungile, Giostra will acquire 10% from Absa and 9% from DMT Trust.
9 See pages 8 and 9 of the transcript.
10 During the second leg of the transaction, Giostra will sell the interests acquired
during the first leg as follows:
In Dorbyl, Clidet No 517 will acquire 20% from Giostra.
In GRS, Clidet No 517 will acquire 25% from Giostra.
In Midas, Clidet No 517 will acquire 10% from Giostra.
In Busaf, Clidet No 517 will acquire 20% from Giostra.
In DFC, Clidet No 517 will acquire 13.5% from Giostra.
In Kulungile, Clidet No 517 will acquire 19% from Giostra.
3
The relevant market
15. Clidet 517 is a newly formed shelf company created solely for the present
transaction. It has not conducted any business yet. A brief description of the activities
of Clidet 517’s shareholders follows.
16. Mbube is a newly formed BEE consortium, and has not yet carried out any
business activity. Mbube’s shareholders are the Gantsho Trust, the Roodebloem
Trust and the Woodforbe Trust. The parties advised us at the hearing that none of
these trustees control Mbube. Neither the Gantsho nor the Roodebloem Trust has
any other investments other than an interest in Mbube. The Woodeforbe Trust is an
investment trust which owns a BP service station in Cape Town and an interest in
Kovacs (Pty) Ltd (“Kovacs”). Kovacs holds an interest in Mesa Energy and is active
in the oil industry.
17. Nokaneng Trading , Limosa, MKMVA and PDI are investment entities, and are not
active in any market/s as it stands now. Three shareholders, i.e., Alex Mogane,
Shima HM Nokaneng and Sharon Maleka, control Nokaneng Trading. Sharon has a
10% interest in Silver Unicon Trading 33 (Pty) Ltd , which although has not yet
acquired a mining licence nevertheless intends to operate in the coal mining industry.
18. We turn now to consider what the primary target firms provide and/or supply.
19. Giostra is a newly formed company, and is not active in any market yet.
20. Dorbyl is a highly diversified industrial group of long established businesses
offering a wide range of products and services in the mining, rail, materials handling ,
ship repair and heavy engineering industries. 11
21. GRS consists of 2 roofing manufacturers: Browbuilt Metal Sections (“Browbuilt”)
and HH Robertson (“HHR”). Both companies manufacture and supply commercial
and HH Robertson (“HHR”). Both companies manufacture and supply commercial
and industrial steel roof covering and wall cladding profiles (concealed fix and
pierced fix), steel floor decking profiles and lightweight metal roofing systems. 12
22. Midas is an investment holding company which operates through its subsidiaries.
It is a leading distributor and valueadded provider of automotive parts, services and
accessories from global manufacturers to the enduser in South Africa. 13
23. Busaf manufactures bus bodies for the bus industry and refrigerated insulated
trailers for the freight transport market. It is also a distributor of ERF trucks and
parts.14
24. DFC operates nationally, and manufactures and distributes a wide range of
valves and submersible pumps. Its product range includes a number of wellknown
brands such as VentOMat, Saunders, VOSA, Glenvalve, Biman and Clayton. No
11 Refer to the parties’ competitiveness report (Pages 853857).
12 See the record (pages 858861).
13 Supra, pages 861863.
14 Ibid, pages 565 and 863).
4
other player supplies the identical range of products as DFC. 15
25. Kulungile consists of 2 divisions, viz., Baldwins Steel and Stalcor. The former
processes and distributes carbon steel whilst the latter division processes and
distributes stainless steel and aluminium. Kulungile also operates nationally. 16
Impact on competition
26. In light of the facts set out above, the Commission submitted that the proposed
transaction was unlikely to result in the substantial lessening or prevention of
competition in the relevant market. From all the information and/or evidence
submitted before us, there appeared to be no overlap in the products and/or services
of the acquiring firm vis àvis those of the target firms. The merging parties indicated
that they both operate nationally. The merging parties intimated that the deal was in
fact an empowerment transaction which would result in the introduction of a BEE
entity into the various primary target firms, and thereby gain an opportunity to
participate in a variety of markets. The merging parties were adamant that no vertical
integration would result from this merger.
27. We did not see any reason (irrespective of any market definition adopted) to
deviate from the Commission’s submissions that the transaction was unlikely to result
in the substantial lessening or prevention of competition. We accordingly approve the
merger unconditionally.
Public Interest Concerns
28. The parties intimated that no negative impact on employment was envisaged, as
the primary acquiring firm was a newly formed entity with no employees. There are
no other public interest issues at stake.
_______________ 18 January 2005
Norman Manoim Date
Concurring: MTK Moerane and Medi Mokuena
For Giostra Investments: Jean Meijer & Tsakane Mhlanga (Cliffe Dekker
Attorneys)
For Clidet 517: Eric Mabuza (Mabuza Mabunda Inc.)
For the Commission: Makgale Mohlala ( Mergers & Acquisitions )
15 Ibid, pages 222223; and 863866).
16 Ibid, pages 438; and 866869).
5
6