COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 34/LM/Apr06
In the matter between:
PEDAL TRADING 130 (PTY) LTD Acquiring Firm
and
MB TECHNOLOGIES (PTY) LTD Target Firm
_______________________________________________________________
Panel : Y Carrim (Presiding Member), U Bhoola (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 31 May 2006
Delivered on : 17 July 2006
REASONS FOR DECISION
Approval
[1] On 31 May 2006, the Competition Tribunal unconditionally approved the
proposed merger between Pedal Trading 130 (Pty) Ltd (“Pedal Trading”) and
MB Technologies (Pty) Ltd (“MB Technologies”).
The transaction
[2] Pedal Trading is a newly established shelf company owned by the Royal
Bafokeng Nation (“RBN”), a community consisting of approximately 300 000
people living in the Rustenburg valley in the North West province. RBN owns
the entire issued share capital of each of Royal Bafokeng Finance (Pty) Ltd
(“RBF”) and Royal Bafokeng Resources Holding (Pty) Ltd (“RBRH”). 1 Pedal
training’s premerger shareholders in its entire issued share capital are ABSA
(37.51%), Tarsus Group Ltd (“Tarsus’”) (59.17%) with the remaining 3.31% held
by minority shareholders. 2
[3] The proposed transaction entails the acquisition by RBF of 26% of the
entire issued share capital in MB Technologies. Further to this, and pursuant to
the veto rights to be exercised by both parties, RBF will be able to exercise joint
control in the target firm postmerger. In the merger filing, the parties had
requested for the approval of the initial acquisition of 26% in the target firm as
well as for the approval of call and put options in favour of Pedal Trading that, if
these were to be exercised, would ultimately result in RBF acquiring 50.1% of
the shares in MB Technologies. 3 The Tribunal is not in the practice of granting
approvals for elements of a transaction concerning changes of control, which
1 We note that both RBN and RBRH hold direct and indirect shareholding in a number of
subsidiaries, none of which are relevant for purposes of this transaction. For a complete list of
the aforesaid subsidiaries, see page of the Commission’s Mergers and Acquisitions Report as
well as pages 22 –27 of the merger record.
2 Tarsus is effectively owned by 3 entities, viz., Wayfield Investments Ltd (“Wayfield”) and
Coyote Enterprises Inc (“Coyote”) (who holds equal shares thereof – i.e., 41.81% each) and
Spiller Ltd (“Spiller”), which holds the remaining 16.38%.
Spiller Ltd (“Spiller”), which holds the remaining 16.38%.
3 The Commission had not dealt with this aspect of the transaction in its recommendation.
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are dependent on a future event, which may or may not occur. The Tribunal
notes that as was previously decided, a merger, which entails a change from
joint control to sole control, is notifiable. 4 This was brought to the attention of
the merging parties at the hearing of this matter. In the result, the merging
parties submitted that they were willing to have the acquisition of the 26%
approved and it is expected that they would notify the Commission in the event
that the call and put options are exercised. 5
Rationale for the transaction
[4] RBF sees the proposed deal as a platform through which RBF will gain
an investment opportunity in the information technology (IT) sector, which is
rapidly growing and developing. From the target firm perspective, the proposed
transaction will enable MB Technologies to obtain permanent capital injection
from RBF, and will further enable MB Technologies to achieve its BEE status in
conformity with the codes of Good of Good Practice published under the Broad
Based Black Economic Empowerment Act. 6
The Relevant Market
[5] Pedal Trading is a newly formed entity not trading at the moment. RBN
has mining and nonmining interests. RBF is an investment holding company
for RBN’s nonmining interests, which it conducts through various subsidiaries.
RBN’s mining interests are held by another subsidiary of its own, known as
Royal Bafokeng Resources Holding (Pty) Ltd (“RBRH”), which is an investment
holding company operating through a number of subsidiaries. The various
4 Ethos Private Equity Fund IV and Tsebo Outsourcing Group (Pty) Ltd [2003] 2 CPLR 371
(CT).
5. See in this regard, pages 15 of the transcript dated 31 May 2006.
6 Page 68 of the merger record.
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subsidiaries referred to above are irrelevant for purposes of analysing the
proposed transaction as each of them provides distinct services from each
other.7
[6] MB Technologies operates, through its subsidiaries, in the IT sector and
distributes branded information technology hardware (i.e., PCs, laptops,
servers, printers, and other IT peripherals), IT software, IT consumables (i.e.,
print cartridges, disk, tape and other media), and IT consulting and support
services. ABSA is a financial services institution whose activities include retail
and merchant banking, private equity investment, insurance and asset
management. Tarsus an offshore investment holding company, which does not
operate in South Africa. 8
Competition analysis
[7] It is clear from the above discussion that each of the parties to the
merger operates in their respective distinct product markets. We need not
consider the likely or unlikely competitive impact of the proposed merger given
the absence of product overlap.
Public Interest
[8] The proposed transaction merely constitutes a restructuring of the
MB Technologies’ current shareholding. The merging parties do not
envisage any job losses postacquisition. 9
Conclusion
[9] There are no adverse public interest issues following from the merger. Nor any
change in the current competitive market structure. Hence we approve the proposed
acquisition by RBF of 26% of the entire issued share capital in MB
Technologiesunconditionally.
7 For a complete description of each of the various subsidiaries, see pages 45 of the
Commission’s mergers & acquisitions report. See also pages 6870 of the merger record.
8 Its current controlling shareholders are Wayfield, Coyote and Spiller all of whom have no other
business activities in South Africa other than their current shareholding in Tarsus.
9 See page 16 of the merger record.
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Y Carrim
Presiding Member
U Bhoola and M Mokuena concur in the judgment of Y Carrim.
Tribunal Researcher: T Masithulela
For the merging parties : M Ntlha assisted by T Mhlanga (Cliffe Dekker
Inc.)
For the Commission : L Lamola assisted by S Nunkoo (Mergers and
Acquisitions)
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