Cherry Moss Trade and Investment 119 (Pty) Ltd and Main Street 415 (Pty) Ltd (90/LM/Oct06) [2007] ZACT 3 (9 January 2007)

COMPETITION TRIBUNAL OF SOUTH AFRICA
                              Case No.:  90/LM/Oct06
In the matter between:
CHERRY MOSS AND INVESTMENTS 119 (PTY) LTD                 Acquiring Firm  
and
MAIN STREET 415 (PTY) LTD                                                            Target Firm  
_______________________________________________________________
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal 
Member), and M Mokuena (Tribunal Member)
Heard on : 08 December 2006
Order issued on : 08 December 2006
Reasons issued on : 09  January 2007   
REASONS FOR APPROVAL
Approval
[1] On   08   December   2006,   the   Competition   Tribunal   unconditionally  
approved   the   proposed   merger   between   Cherry   Moss   Trade   and   Invest   119  
(Pty) Ltd (“AC Consortium”) and Main Street 415 (Pty) Ltd (“Main Street 415”).
The parties and the merger transaction
[2] The subject matter of the proposed transaction is Dow Plastics, a division  
of   Sentrachem   Ltd.   By   way   of   a   background,   Dow   Plastics   was   originally

acquired by Plastomark (Pty) Ltd (“Plastomark”), which has the full shareholding  
of Main Street 415. Plastomark disposed of its shareholding in Main Street 415  
before the completion of the transaction to the AC Consortium, and Main Street  
415 was the acquirer of the Dow Plastics division. 1 
[3] The   AC   Consortium   is   a   wholly   owned   subsidiary   of   ABSA   Capital,   a  
division of ABSA Bank Ltd. The proposed merger constitutes a private equity  
investment by ABSA Capital, a financial institution, into Main Street 415. ABSA  
Bank will pay (on behalf of Main Street 415) the purchase consideration for Dow  
Plastics   directly   into   Sentrachem.   We   were   advised   that   as   part   of   the   Dow  
Plastics disposal transaction, ABSA Capital is for the timebeing holding part of  
the shareholding in the AC Consortium, which is destined for an empowerment  
partner. 
[4] Post­acquisition,   ABSA  Capital   is  effectively  in   control   of   the  business  
until   such   time   that   the   empowerment   transaction   takes   place.   The   holding  
structure of the AC Consortium includes ABSA Capital (as to 70%) of the equity  
whereas management will hold 30%. 2 
1  During the hearing we queried which parties were the parties to the present transaction since  
the purchaser of the target firm is now the AC Consortium and not Main Street 415. as appears  
in the merger notice. The merging parties’ legal representative, Mr Langbridge, advised us that  
a  merger  filing  had been made  to  the Commission  in  respect of  the  transaction,  before  the  
disposal   of   the   shares   in   Main   Street   415   was   concluded,   and   once   it   was   concluded,   the  
Commission was subsequently requested to disregard that application and to fold it into the  
present merger filing, the so­called Cherry Moss Trade and Invest 119. See   pages 1­2 of the  
transcript dated 08 December 2006.
2  See page 4 of the transcript dated 08 December 2006.
  2

Rationale for the transaction
[5] Sentrachem   and   Main   Street   415   entered   into   the   Dow   Plastics  
Agreement   on   21   August   2006   in   terms   of   which   Main   Street   415   was  
purchasing the business of Dow Plastics, a division of Sentrachem, as a going  
concern. Plastomark, a subsidiary of Ravago SA (“Ravago”), owned the entire  
issued   share   capital   of  Main  Street  415.   Following   such  agreement,   Ravago  
decided   to   pursue   a   different   business   strategy   that   did   not   include   its  
ownership of Dow Plastics hence the present acquisition.
The relevant market
[6] The   AC   Consortium   is   a   newly   formed   entity   for   the   purposes   of   this  
transaction, and has never traded. ABSA Bank is a financial institution which  
provides a variety of financial services. Main Street 415 is a dormant company  
that has not traded previously. Dow Plastics manufactures, markets and sells  
polypropylene (“PP”) and high­density polyethylene (HDPE”) products.   
Competition analysis
[7] As is clear from the above there is no overlap in the services provided by  
the merging parties. We simply observe that no change in the current structure  
of   the   markets   in   which   the   merging   parties   compete   is   envisaged   post­
acquisition. Nevertheless we do want to point and emphasise that what we are  
approving in this instance is simply the transfer of equity, but not the distribution  
agreement   entered   into   between   the   AC   Consortium,   Main   Street   415   and  
  3

Plastomark. Whether the distribution agreement is a good or bad agreement is  
not for us to look into or pronounce upon for purposes of this transaction.
Public Interest
[8] There were no public interest issues at stake here. There are no planned
retrenchments in South Africa as a consequence of the proposed merger. 3 
Conclusion
[9] We   accordingly   endorse   the   Commission’s   view   that   the   proposed  
transaction   is   unlikely   to   result   in   the   substantial   prevention   or   lessening   of  
competition   in   the   relevant   markets.   We   accordingly   approve   the   proposed  
transaction unconditionally.
_______________
N Manoim  
Presiding Member
Y Carrim and M Mokuena concurring.
Tribunal Researcher: T Masithulela
For the Acquiring Firm : J Roodt and S du Toit ( Roodt Inc. )
For the Target Firm : J Forman ( Webber Wentzel Bowens )
3  The employees employed by the target firm are to be transferred from Dow plastics to the  
Acquiring   Firm   in   accordance   with   section   197   of   the   Labour   Relations   Act   66   of   1995,   as  
amended.  See pages 31­32 of the merger record .
  4

For Dow Plastics : S Langbridge ( Bell Dewar & Hall Inc. )
For the Commission : M van Hooven (Mergers & Acquisitions)
  5