COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case no.: 10/LM/Feb06
In the large merger between:
Calibre Private Equity Partnership No. 12
and
Salvage Management and Disposals (Pty) Ltd
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Reasons
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Introduction
1. On 22 March 2006 the Tribunal approved the merger between Calibre
Private Equity Partnership No. 12 and Salvage Management and
Disposals (Pty) Ltd . The reasons are set out below.
The Transaction
2. The transaction involves the acquisition by Calibre Private Equity
Partnership No 12 (“Calibre Partnership”) of a 30% interest together with
minority protections in Salvage Management and Disposals (Pty) Ltd
(“SMD”). Calibre Partnership is a special vehicle created for purposes of
this transaction.
3. Calibre Partnership is jointly controlled by a general partner Calibre
Private Equity Trust (“Calibre Trust”) holding 0.05% of the shares and
Volentia (Pty) Ltd with 83.50% who is one of two limited partners, the
other being PTW Investments (Pty) Ltd (“PTW”) holding 16.45%. PTW
does not have any form of control over Calibre Partnership.
4. Calibre Trust is controlled by its trustees being Theunis de Bruyn, Werner
Stals, Pieter Gideon Viljoen and Johnson Ntabankulu Njeke.
5. Volentia is a wholly owned subsidiary of Xanthe Investment Holdings (Pty)
Ltd which is controlled by KTI. KTI is jointly controlled by Kagiso Trust
holding 50.32% and IPIL, a wholly owned subsidiary of Remgro, holding
37.15%.
6. SMD’s shareholders are Aldu Trust holding 100 shares (33.33%), the
Wilgers Trust holding 100 shares (33.33%), the Stroebel Trust holding 25
shares (8.33%) and Hofmeyer holding 75 shares (25%). SMD owns SMD
Towing.1
7. The sale shares comprise 90 shares (30 shares each) being bought from
Aldu Trust, Wilgers Trust and Hofmeyer. As a result Calibre will hold 30%
of the total issued share capital in SMD including certain minority
protections, which will afford it joint control of SMD.
Rationale for the transaction
8. According to the parties the transaction will facilitate black economic
empowerment.
Effect on Competition
9. Calibre Partnership, the acquiring firm, is an investment Trust which owns
two portfolio companies namely iVolve and Brolink. iVolve is engaged in
the supply, finance and maintenance of computer hardware products and
Brolink offers a link between insurance companies and brokers.
10. KTI is the investment arm of Kagiso Trust, which focuses on investment
banking activities that do not require a banking licence. Remgro is an
investment holding company with investments in tobacco products,
banking and financial services, printing and packaging, engineering and
motor components, life assurance, medical services, mining, petroleum
products, food, wine and spirits and various other trade mark products.
11. The target firm, SMD, manages and sells insurance salvage motor
vehicles. SMD has salvage contracts with a number of insurance
companies, including an exclusive agreement with OUTsurance, a
companies, including an exclusive agreement with OUTsurance, a
1 SMD will acquire SMD Towing prior to this transaction. The transaction is a small merger and therefore
need not be notified.
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subsidiary of Remgro. The contracts involve the upliftment, storage and
sale of salvage vehicles on either commission basis or an outright
purchase basis.
12. SMD Towing is involved in the towing and transportation of motor vehicles
that have broken down or which have been damaged in accidents. It also
moves repossessed vehicles on behalf of ABSA and transports new
vehicles between motor dealers on behalf of Forecourt Express.
13. Neither Calibre Partnership nor any of the firms controlling it are involved
in any business activities or produce any products or services
interchangeable with those of SMD. However, since SMD and
OUTsurance are in a vertical relationship we need to consider this aspect
of the transaction further.
14. It is accepted in competition law that vertical mergers only give rise to
competition concerns if one or both of the merging parties possess market
power in their respective upstream or downstream relevant product
markets since which could lead to the foreclosure of either customers or
suppliers. Neither SMD nor OUTsurance posess market power in their
respective product markets. Outsurance estimates its market share at
approximately 2.7% within the primary shortterm insurance market and
on a narrow definition of the relevant market at approximately 5.2% within
the market for motor vehicle insurance. Within the downstream market in
which SMD operates its market share is approximately 13%. There are
numerous other players in the towing industry.
15. In light of the above we find that the transaction will not substantially
prevent or lessen competition in the relevant vertical markets.
Public interest issues
16. The transaction does not give rise to any public interest concerns.
____________ 27 March 2006
Y Carrim Date
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Concurring: M Moerane, L Reyburn
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