COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 59/LM/Jul06
In the matter between:
Imperial Holdings Limited Primary acquiring firm
and
Alert Engine Parts (Pty) Ltd Primary target firm
Panel : DH Lewis (Presiding Member), Y Carrim (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 16 August 2006
Decided on : 16 August 2006
Reasons
Approval
[1] On 16 August 2006 the Competition Tribunal issued a merger
clearance certificate approving the merger between Imperial
Holdings Limited and Alert Engine Parts (Pty) Ltd. The reasons
appear below.
The Parties
[2] The acquiring firm is Imperial Holdings Limited (“Imperial”), a
company duly listed on the JSE Securities Exchange. The
following are shareholders who hold more than 5% of the issued
share capital of Imperial:
[2.1] Public Investment Corporation 18.21%;
[2.2] Old Mutual 11.23%;
[2.3] Ukhamba 10.15;
[2.4] Sanlam 8.4%; and
[2.5] Lereko Mobility 7.25%.
[3] Imperial has more than twenty subsidiaries but for the purposes
of the current transaction, only Imperial Auto Parts (Pty) Ltd
(“Imperial Auto”) is relevant since it is the only division of
Imperial dealing in nonbranded motor vehicle spare parts. 1
[4] The primary target firm is Alert Engine Parts (Pty) Ltd (“Alert”).
There is no single entity that controls Alert. Alert’s shareholders
and their respective shareholding are as follows:
[4.1] The ANC Trust 25.31%;
[4.2] Van Hoogstraten Family Trust 25.56%;
[4.3] Antony Van Hoogstraten Family Trust 25.82%;
[4.4] Bilton 4.31%;
[4.5] Dennis Hoffe Trust 1%;
[4.6] Louw 3%; and
[4.7] Monteverdi 8%.
[5] Alert does not control any firms.
The Merger Transaction
[6] Imperial will acquire the entire issued share capital in Alert. 2
Postmerger, Alert will be a wholly owned subsidiary of Imperial.
1 On page 23 of the record Imperial submitted that save for Imperial Auto, the services of all
the other divisions of Imperial are not interchangeable with or a substitute for, any product or
service provided in, into or from South Africa by Alert.
2 The entire issued share capital of Alert is to be acquired by Imperial in terms of a sale of
shares agreement on pages 81105 of the record.
2
Rationale
[7] Imperial perceives the acquisition of Alert as an opportunity for
expanding and growing its business.
[8] Alert regards the acquisition by Imperial as enabling it to operate
competitively and profitably.
The parties’ activities
The acquiring firm
[9] Imperial Group is involved in the transportation, warehousing
and logistics services markets in Southern Africa, Europe and
United Kingdom. Imperial’s only relevant subsidiary in this
transaction is Imperial Auto.
[10] Imperial Auto sells nonbranded motor vehicle spare parts and
accessories.3 These include alternators, coils, hooters,
distributors, ignition cables among others.
[11] Imperial Auto also sells nonbranded engine parts which include
engine bearings, engine gaskets, engine valves, oil pumps,
pistons and rings, ring gears, flywheels, sleeve kits, timing belts,
timing gears, timing chains, timing tensioners, among others.
[12] Imperial is also involved in the sale of spare parts for original
equipment manufacturers (“OEM’s). Apart from Imperial Auto,
3 Nonbranded motor vehicle spare parts and accessories are parts that are not branded by
original equipment manufacturers (“OEMs”), but are alternatives or generic parts, produced
by other parts manufacturers such as Bosch, Bosal and ArvinMeritor.
3
the other divisions of Imperial and the dealerships of Imperial
are only involved in OEM’s parts and are not involved in non
branded parts. 4
The target firm
[13] Alert procures, markets and distributes, for the aftermarket, an
extensive range of quality internal combustion engine
components for motor vehicles. Alert also sells nonbranded
motor spare parts which include timing components, filters,
clutches, and lubricants, among others.
[14] The parties submitted that Alert only concentrates on nonbranded
engine spare parts and does not deal in general motor spare parts. 5
The product market
[15] There is product overlap in the activities of the merging parties
in the sale of nonbranded motor vehicle spare parts and engine
parts but as shall be seen below the product overlap is small
and does not raise competition concerns. The Commission
submitted that original/branded spare parts do not fall in the
same market as generic/nonbranded spare parts. In this regard
the Commission relied on the case of Midas Group (Pty) Ltd and
General Motors South Africa (Pty) Ltd. 6In that case the Tribunal
concluded that branded and nonbranded spare parts are not in
the same market. The parties submitted that original parts are
more expensive and target the higher income market as
compared to nonbranded spare parts which are cheaper and
target the lower income market. The parties further submitted
4 See page 23 of the record.
5 See page 22 of the record.
6 Tribunal Case number 95/LM/Oct05.
4
that original/branded spare parts cannot be substituted for
generic/nonbranded spare parts as they cater for a different
customer base.
[16] Based on the submissions above, the Commission concluded
that the relevant product market is the market for the distribution
of nonbranded motor vehicle spare parts.
[17] At the hearing the parties submitted that there is no supply side
substitutability between the distribution of nonbranded engine
parts and the distribution of nonbranded general spare parts
since the former requires a lot more skill not readily available to
a distributor of the latter. 7 However, for the purposes of this
transaction the parties accepted the Commission’s definition and
analysed the market as a consolidated market for nonbranded
general spare parts and nonbranded engine parts. 8
Relevant geographic market
[18] The Commission defined the geographic market as national
because the merging parties and their competitors have outlets
in major cities throughout South Africa.
[19] It is not necessary for us to make a finding on the relevant
product market because on either version competition does not
appear to be compromised by the merger. We accept the
definition of the geographic market as national. We will follow
the parties and utilise the consolidated market definition
favoured by the Commission.
Effect on competition
7 See page 45 of the Transcript.
8 See page 5 of the Transcript.
5
[20] The merging parties and the Commission provided the following
market share figures. 9
Competitor Market share (%)
Midas 20.07
Super Group 18.52
Alert Engine Parts 5.99
Gaydon 4.44
Engine Parts 4.44
Imperial Auto 1.85
Others 40.69
Total 100
[21] Premerger, Imperial has a market share of 1.85% and Alert has
a market share of 5.99%. The merged entity will have a market
share of 7.84% in the national market for nonbranded motor
vehicle spare parts. This market share is small and does not
raise competition concerns in the relevant market. Moreover, the
merged entity will continue to face competition from players
such as Midas Group which has a market share of 24.07%,
Supergroup with a market share of 18.52%, Gaydon’s with a
market share of 4.44% and Engine Parts with a market share of
4.44%.
Public Interest issues
[22] There are no public interest issues.
Conclusion
9 The merging parties provided the market shares in an email dated 20 July 2006 on page
374 of the record.
6
[23] We conclude that the merger will not lead to a substantial
lessening or prevention of competition. Nor are there public
interest issues raised by this transaction. The merger was
accordingly approved without conditions.
_______________ 30 August 2006
D H Lewis Date
Presiding Member
Concurring: Y Carrim and M Mokuena
Tribunal Researcher : R Kariga
For the merging parties : Safeera Mayet, TWB Attorneys
For the Commission : Edwina Ramohlola and Makgale Mohlala,
Mergers and Acquisitions
7