COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 97/LM/Oct05
In the large merger between:
SCBeteiligungsellschft MBH
and
Sud Chemie AG
Reasons for Decision
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APPROVAL
On 24 November 2005 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between SCBeteiligungsellschft MBH and Sud
Chemie AG in terms of section 16(2)(a). The reasons for the approval of the
merger appear below.
The Parties
1. The acquiring firm is SCBeteiligungsellschft MBH (“SCB”), a subsidiary of
One Equity Partners LLC (“OEP”). OEP is ultimately controlled by JP
Morgan Chase & Co (“JPMC”). SCB is a special purpose vehicle, set up
specifically to purchase shares in Sud Chemie.
2. JPMC is a public company listed on the London, New York and Tokyo
Stock Exchanges. Its subsidiaries include JP Morgan Capital Corp.
(“JPCC”) and JP Morgan Partners (“JPMP”). Its South African subsidiaries
include:
a. JP Securities South Africa (Pty) Ltd (“JP Securities”) and
b. JP Morgan Equities Ltd (“JP Morgan Equities”)
c. Sharestock Nominees (Pty) Ltd (“Sharestock”)
3. JPMP and OEP are separate investment arms of JP Morgan Chase and
their respective businesses as well as those of their portfolio companies are
operated independently of each other.
4. Other subsidiaries include JP Morgan Administration Services (Pty) Ltd,
controlled by JP Securities and Cazenove South Africa (Pty) Ltd. JP
Morgan Chase Bank also has a branch in South Africa.
5. The primary target firm is Sud Chemie AG (“Sud Chemie). It is not
controlled by any firm. It is a listed company. Its largest shareholders are
AZSDC Vermogensverwaltungsgesellschaft MBH as to 19%; Possehl
Beteiligungsverwaltung GmbH, as to 10.1% and BLB
Beteiligungsgesellschaft Jota mbH and co. KG Nr. 3, as to 10%.
6. In South Africa, Sud Chemie controls Sud Chemie SA (Pty) Ltd (“SCSA”),
which in turn controls Sud Chemie Zeolites (Pty) Ltd, as to 70% and Sud
Chemie Sasol, as to 80%, Sud Chemie Adsorbents SA (Pty) Ltd as to
100%, Sud Chemie Water and Process Technologies (Pty) Ltd as to 100%
and Nedhigh Investments (Pty) Ltd as to 100%.
The Merger Transaction and Rationale
7. OEP is acquiring, through SCB, the majority of the share capital and
majority of voting rights in Sud Chemie. It is part of an international
transaction insofar as it has been notified in various other jurisdictions,
including Brazil, the US, Korea, Austria and Germany. The US has provided
merger clearance already.
8. OEP seeks to expand into the catalytic converter market by contributing
capital and through various acquisitions.
The relevant product and geographic markets
9. Since SCB is a special purpose vehicle constituted by this
transaction, it has not traded up to now.
10. OEP is an investment company that provides private equity investment and
10. OEP is an investment company that provides private equity investment and
also manages investments and loan assets undertaking direct equity
investments, venture capital and buyouts. It focuses on acquiring majority
shareholdings in firms that are engaged in “mature middlesized” markets.
Each of its portfolio companies are managed separately and conducted
independently of each other.
11. Sud Chemie conducts business internationally by trading in the specialty
chemicals market. It is a listed company. Its South African subsidiaries are
Sud Chemie SA, a technological partner for the petrochemicals industry;
Sud Chemie Zeolites, a firm producing zeolite catalysts for use in refineries
and petrochemical plants to improve the performance of petrol, diesel and
lubricants. It has two plants, one in KZN and the other at PetroSA refinery
at Mossel Bay.
12. Through a separate arm of its investment tentacles, JP Morgan Chase
owns a company known as Zeolyst International (“ZI”). ZI sells zeolite
powder to the automotive industry in South Africa. Although we know the
respective turnovers of ZI and Sud Chemie in South Africa, we have no
information on the size of the market nor do we have a proper market
definition. Zeolyte appears to be ubiquitous in its uses and hence product
definition is complex. Neither the merging parties nor the Commission have
been able to come up with the necessary information for us to make this
assessment with any comfort. For this reason, we have focussed our
attention on whether ZI and Sud Chemie can both be regarded as subject
to the control of JP Morgan Chase. Although both can be regarded as
traced to this same ancestry, we are satisfied that they are run as entirely
independent businesses and furthermore, that strategic information from
one is not exchanged with the other via any intermediary structure. In this
regard we have received written assurances to this effect from both firms.
13. We are satisfied on the basis of these reassurances that ZI and Sud
Chemie are not part of the same control structure, since the relationships
between the portfolio entities in the JP Morgan Group that exercise direct
control over the respective companies, are too remote. Accordingly, we find
that there is no overlap in activities between the merging firms and hence
that there is no overlap in activities between the merging firms and hence
we need not decide whether the market definition adopted by the parties
should be narrower than alleged for the purpose of this filing.
Conclusion
We conclude that there is no effect on competition. The merger will not lead to a
substantial lessening or prevention of competition in any market. There are no
public interest concerns which would alter this conclusion.
The Tribunal therefore approves the transaction unconditionally.
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20 December 2005
N. Manoim Date
Concurring: M. Mokuena, Y. Carrim
For the merging parties: Webber Wentzel Bowens Attorneys
For the Commission: S. Nunkoo Mergers and Acquisitions