COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 104/LM/Dec06
In the matter between:
TFMC Holdings (Pty) Ltd Acquiring Firm
And
LGM South Africa Facilities Managers and Engineers (Pty) Ltd Target Firm
Panel : D Lewis (Presiding), N Manoim (Tribunal Member) and
M Mokuena (Tribunal Member)
Heard on : 20 December 2006
Decided on : 20 December 2006
Reasons issued on : 09 January 2007
Reasons for Decision
APPROVAL
1] On 20 December 2006, the Tribunal approved the merger between TFMC
Holdings (Pty) Ltd (“TFMC”) and LGM South Africa Facilities Managers and
Engineers (Pty) Ltd (“LGM”). The reasons for approval follow.
THE TRANSACTION
2] LGM is controlled by FM Holding GmbH (“FM Holding”), which holds 90% of its
issued shared capital. FM Holding is ultimately controlled by Hochtief
Aktiengesellschaft. The remaining 10% is held by South African Airways (Pty) Ltd.
LGM has one subsidiary, LGM South Africa Auxiliary Maintenance (Pty) Ltd (“LGM
Auxiliary Maintenance”) of which it owns 70%. 1
3] TFMC is a wholly owned subsidiary of Mvelaphanda Group Limited, which in turn
1 Tshungu & Associates hold the remaining 30%. See page 123 of the record.
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is controlled by Mvelaphanda Holdings. 2
4] TFMC intends acquiring from FM Holding its portion of the issued share capital in
LGM. TFMC will also acquire the loan accounts, being all claims, which FM Holding
or its affiliates have against LGM.
5] According to the parties, FM Holding wished to dispose of its interests in LGM.
The sale of LGM was therefore concluded following a tender process in which nine
potential investors bid for the business. The parties state in their competitiveness
report that in order for LGM to remain an effective competitor in the market, it is
required to become empowered from a BEE perspective.
THE PARTIES’ ACTIVITIES
6] TFMC provides facilities management services which comprises 6 categories of
services: Technical facilities management, property management and professional
services, facility support services, commercial and general administration,
maintenance operations and call centre facilities.
7] Mvelaphanda’s investment portfolio includes activities in mining and resources,
mining and technical services, facilities management services, financial services,
property, healthcare, information technology, telecommunications, food services,
support services and general industrial sectors.
8] LGM provides facilities management services in the following sub categories:
technical facilities management, professional services, commercial and general
administration, maintenance improvement programmes and call centre facilities.
LGM Auxillary Maintenance is involved in the provision of nontechnical services
which includes cleaning and general caretaker services.
9] According to the parties, the nontechnical services provided by LGM Auxillary
2 According to the merging parties, no single shareholder controls Mvelaphanda Holdings.
2 According to the merging parties, no single shareholder controls Mvelaphanda Holdings.
The TJS Family Trust holds 25%, Mvelaphanda Empowerment Trust 14.43%, Mvelaphanda
Investment Trust 11.85%, the Dikela Trust and the Matimba Trust hold 10% each,
Mvelaphanda Management Trust, Mvelaphanda Staff Trust, the Mantoba Trust and the
Qwathi Trust each hold 7.18%.
2
Maintenance are similar to those provided by Rebserve Cleaning, a subsidiary of
Mvelaphanda. These general cleaning services are referred to as “infrastructure
property management” services.” 3
3 See page 80 of the Commission’s record.
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IMPACT ON COMPETITION
10] The merging parties’ activities overlap in the market for the provision of
infrastructure property management and in the market for the provision of facilities
management services. The parties however, argue that it may not be necessary to
distinguish between these markets as the boundaries between the two have become
blurred. 4 The parties and Commission are in agreement that the relevant geographic
market is national in both markets, since the major providers of these services
operate nationally.
11] Although we have previously upheld the distinction between the two markets 5
we need not in these circumstances make a definitive finding on the relevant market,
as in our view the transaction does not raise serious competition concerns.
12] In the market for the provision of facilities management services, an
examination of the market shares provided by the merging parties reveals that the
accretion would be low.
The market for the provision of Facilities Management services
Company Estimated % market
share
TFMC 12
Drake and Scull 8
Johnson Controls 8
WSP Sidibene (incorporating Dynacon) 7
Old Mutual Properties FM 6
FMA 6
LGM SA 5
Gensec 5
Broll FM 5
Colliers FM 4
4 See page 801 of the Commission’s record: “[these markets] are often provided as a basket
of services or total solution to client…the definitional boundaries of facilities management
services have shifted over the years… some infrastructure property management services
may be provided as part of a facilities management contract.
Many suppliers of facilities management originated from the “traditional” property
management companies or cleaning companies, who have seen the opportunity to extend
their range of services beyond infrastructure property management services, towards more
occupierorientated services.
5 Mvelaphanda Holdings and Rebserve Holdings Limited 69/LM/Sep04.
4
Arcus FM Solutions 4
Mesure 4
ESS 4
PME 3
Dijalo 3
ECH Solutions 3
Thlokomela 3
Afroteq 3
Nanza FM 2
Others 5
Source: Merging parties’ estimates for the year 2005
13] TFMC’s market share can in fact be ascribed to its sole client, Telkom. LGM has
very large clients 6 who have significant countervailing power. There are a large
number of participants in this market and customers of the LGM contacted by the
Commission indicated that they also procured these services from the competitors of
the merging parties.
14] In the market for the provision of infrastructure property management services,
the accretion is market share is relatively insignificant 1%. As a result the relative
position of market share participants will not change significantly.
The market for the provision of Infrastructure property management services
Company Estimated % market
share
Prestige 20
Fidelity Supercare 15
Rebserve Cleaning (Mvelaphanda) 15
Ubunya 5
Cleancor 5
LGM SA 1
Other 39
Source: Merging parties’ estimates for the year 2005
6 For example, South African Airways, SABS, Huntsman Trioxide, Daimler Chrysler and
Airchefs Fleet maintenance.
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o. As in the market for facilities management services,
the customers contacted by the Commission
confirmed that they could procure infrastructure
property management services from the other
competitors listed in the table above. The merging
parties further submit that these services may be
provided inhouse if clients are not satisfied with
services levels. Furthermore, the barriers to entry
appear to be low.
CONCLUSION
16] In light of the above, we are of the view that this transaction is not likely to
substantially prevent or lessen competition in any of the markets identified above.
There are no public interest issues, which would alter this view and we accordingly
approve the transaction without conditions.
____________________ 09 January
2007
N Manoim Date
D Lewis and M Mokuena concurring.
Tribunal Researcher: M MuruganModise
For the merging parties: K de Kock (Webber Wentzel Bowens)
For the Commission: K Mahlakoana and H Ratshisusu (Mergers & Acquisitions)
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