COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 56/LM/Jun06
In the matter between :
Kunene Finance Company (Pty) Ltd Acquiring Firm
And
Scarlet Ibis Investments 3(Pty) Ltd Target Firm
_____________________________________________________________________
Panel : N Manoim (Presiding Member), L Reyburn (Tribunal
Member), and M Mokuena (Tribunal Member)
Heard on : 2 August 2006
Decided on : 2 August 2006
Reasons issued: 25 August 2006
REASONS FOR DECISION
Approval
[1]. On 2 August 2006, the Competition Tribunal unconditionally approved
the proposed merger between the abovementioned parties. The reasons for
the decision follow.
Parties
[2]. The acquiring firm is Kunene Finance Company (Pty) Ltd (“KFC”). KFC is
a subsidiary of Kunene Brothers Holdings (Pty) Ltd (“KBH”), which owns
42.8% shares in KFC 1. Institutional Investors hold together 57% of the shares
in KFC 2. The primary target firm is Scarlet Ibis Investment 3 (Pty) Ltd
(“Scarlet”). The CocaCola Export Company (“CCEC”) holds all the shares in
1 For a list on KBH shareholders see page 2 of the Commission’s Report
2 The institutional investors are named on page 2 of the Commission’s Report
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Scarlet.
Transaction
[3]. The parties submitted in their filing that this transaction involves the
second phase of The CocaCola Company’s (“TCCC”) strategy, which is to
transfer control of shares held by Scarlet in TJC Holdings (Pty) Ltd (“TJC”) to
a BEE investor. According to the parties, the first phase involved the
acquisition by Scarlet of the entire issued share capital of TJC with the
intention of disposing of the control of TJC to a BEE company 3. The Coca
Cola Export Corporation (“TCCEC”) currently holds all the shares in Scarlet.
[4]. This transaction involves the acquisition of the issued shares capital in
Scarlet from TCCEC by a BEE company (“KFC”). On the completion of the
transaction, KFC will own 51% shares in Scarlet, and Kunene Beverages
Holdings (Pty) Ltd (“KB”) will acquire 20% of shares in Scarlet and TCCEC will
remain with 30%.
Reasons for the transaction
[5]. According to the parties when Scarlet acquired the entire issued share
capital of TJC, it was always the intention of TCCC to introduce a suitable
BEE investor into the shareholding of Scarlet. The parties further submit that
this transaction is intended to facilitate the transformation of Scarlet for BEE
purposes.
The merging parties activities
[6]. KFC is a diversified holding company and it currently has four major
3 The Commission under case number 2005NOV 1969 approved this transaction.
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areas of investment, being CocaCola Bottling and Distribution, Defence
Electronics and Telecommunications, Financial Services and Motor
Dealership. The financial investors, which are shareholders of KFC, are
involved in financial products and services, which are banking, insurance and
property. In addition, KFC and KB currently hold 13.4% and 6% of shares in
CocaCola Fortune (“CCF”). After this transaction KFC and KB will dispose of
their respective shareholding in CCF to Shanduka Beverages, a new
company to be formed, and Khulile Beverages (Pty) Ltd. At the hearing it was
submitted by Mr Daniel Mokwena from Coca Cola South Africa that the
reason why KFC and KB are disposing of their respective shares in CCF to
Shanduka Beverages is to enable them to acquire sufficient funds to be able
to invest in Scarlet.
[7] The target firm (“Scarlet”) is a bottler of TCCC trademarked beverages.
It manufactures, prepares, packages, sells and distributes various TCCC
brands in the market 4.
Effect on Competition
[8]. The transaction will not substantially prevent or lessen competition in
any product market since there is no overlap in the activities of the merging
parties. According to the Commission although the merging firms activities
overlap in respect of bottling and distribution of beverages, this potential
overlap is eliminated because simultaneously with this transaction KFC and
KB will dispose of their respective shareholding in CCF. There is therefore no
product overlap between the products and services provided by the parties to
the merger.
Public Interest
4 For a list of the various brands manufactured and distributed by Scarlet see pages 1920 of the
Merger Filing
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[9]. No public interest issues arise from this merger.
Conclusion
[10]. Having regard to the above, we conclude that the merger will not lead
to a substantial lessening of competition. Accordingly we agree with the
Commission’s recommendation that the transaction be approved
unconditionally.
_______________ 25 August 2006
N Manoim Date
Concurring: L Reyburn and M Mokuena
Tribunal Researcher : J Ngobeni
For the merging parties : Mondo Ntlha (Cliffe Dekker Attorneys)
For the Commission : Jeffrey Mudzanani and Makgale Mohlala
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