COMPETITION TRIBUNAL OF SOUTH AFRICA
CASE NO: 59/LM/JUN07
In the matter between:
EDGARS CONSOLIDATED STORES LIMITED Acquiring firm
And
NEW CLICKS SA (PTY) LTD Target firm
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Panel : DH Lewis (Presiding Member), N Manoim (Tribunal
Member), and
Y Carrim (Tribunal Member)
Heard on : 15 August 2007
Order issued on : 15 August 2007
Reasons issued on : 17 August 2007
REASONS FOR DECISION
APPROVAL
[1] On 15 August 2007, the Tribunal approved the merger between Edgars
Consolidated Stores Limited and New Clicks SA (Pty) Ltd. The reasons for approval
follow.
THE TRANSACTION
[2] The primary acquiring firm is Edgars Consolidated Stores Limited (“Edcon”),
and the primary target firm is a division of New Clicks SA (Pty) Ltd (“New Clicks”);
Discom Division (“Discom”).
[3] In terms of the proposed transaction Edcon and New Clicks have entered into
an agreement in terms of which Edcon intends to purchase from New Clicks, the
business and assets of Discom as a going concern for the agreed sale price of R360
million.
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[4] According to the parties this is a strategic fit for Edcon to expand its scale of
operation by penetrating into Discom’s core service offering, and using its added
distribution network in order to achieve enhanced customer service. New Clicks’
view is that Discom does not form part of its core activities and that the division’s
future will more effectively be accomplished by Edcon. The rationale for this merger
is also to realize economies of scale in relation to the procurement and fixed-cost
components of its business which include central infrastructure, human resources,
IT, logistics, finance and real estate.
THE RELEVANT MARKET
[5] According to the Commission and the parties there is a clear overlap in the
activities of both Edcon and Discom for the retail of the following products: cellular
phone and photo, baby care products, confectionery, general healthcare, homeware
and appliances, toiletry, beauty and personal care, books and stationary.
[6] The relevant product markets are all in the retail sector. The Commission’s
calculation of the relative market shares, pre and post merger are listed below:-
PRODUCT
CATEGORIES
EDCON % DISCOM % COMBINED %
Cellular Phone and
Photo
4.7 0.1 4.8
Baby Care 6.5 2.0 8.6
Confectionery 0.7 0.4 1.2
General Healthcare 2.1 0.2 2.4
Homeware and
Appliances
6.6 1.2 7.8
Toiletry, Beauty
and Personal Care
0.7 4.1 4.7
Books and
Stationery
28.9 1.0 29.9
[7] In all the relevant markets, the market share accretion as a result of the
merger is relatively small, with the market share in the market for the retail of
books and stationery being moderately high. In their competitiveness report, the
merging parties define this market as general stationery products 1, but the revenue
figures provided include that for books and stationery.2
[8] At the hearing we raised our concerns that the use of the broad market
definition of books and stationery, rather than that of general stationery, could
1 Page 348 of the record
1 Page 348 of the record
2 Page 355 of the record
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possibly present us with distorted market share figures in this market. In response
the merging parties clarified the fact that Discom does not sell books but general
stationery only. They stated further that they had difficulty in obtaining revenue
figures for a market for stationery only.
[9] The Commission and the parties also expressed the view that the
combination of books and stationery was justifiable in respect of supply side
substitution between book and stationery retailers. They accordingly provided us
with a broader market definition.
COMPETITION EVALUATION
[10] In all the relevant product markets, except books and stationery, the
combined post merger shares are less than 10% and do not raise any competition
concerns. In the market for the retail sale of books and stationery, as broadly
defined, the post merger market shares are an estimated 30%. However the
market share accretion as a result of the merger is relatively small. Accordingly, we
find it unnecessary to define a more narrow market for the retail of general
stationery.
[11] We are satisfied that the proposed merger is unlikely to substantially prevent
or lessen competition in any market.
CONCLUSION
[12] There are no public interest issues and we accordingly approve the merger
without any conditions attached.
_______________ 17 August 2007
Y Carrim Date
Tribunal Member
D Lewis and N Manoim concur in the judgment of Y Carrim.
Tribunal Researcher: L Xaba
For the merging parties : D Rudman (Werksmans)
For the Commission : M Mohlala and M Dasarath
(Mergers and Acquisitions)
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