COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 39/LM/Apr07
In the matter between
Clidet NO 694 (Pty) Ltd Acquiring firm
And
CJ Petrow Chemicals (Pty) Ltd Target firm
Panel : D Lewis (Presiding Member); N Manoim (Tribunal Member); Y
Carrim (Tribunal Member).
Heard on : 19 June 2007
Decided on : 25 June 2007
Reasons Issued : 10 September 2007
REASONS FOR DECISION
Approval.
[1]. On 19 June 2007 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Clidet 694 (Pty)Ltd and CJ Petrow Chemicals (Pty)Ltd
unconditionally. The reasons appear below.
Parties.
[2]. The primary acquiring firm is Clidet 694 (Pty) Ltd (“Newco”). Newco is a newly
formed shelf company and does not directly or indirectly control any firms. 1
[3]. The primary target firm is CJ Petrow Chemicals (Pty)Ltd (“Petrow Chemicals”) a
company incorporated under the laws of South Africa. Petrow Chemicals is indirectly
controlled by Crizolda (Pty) Ltd (“Crizolda”) by virtue of its 88% shareholding in CJ Petrow
Holdings (Pty) Ltd (“Petrow Holdings”) which has a 95% stake in Petrow Chemicals.
Transaction
[4]. In terms of the proposed transaction Newco is acquiring the business assets and
other interests of Petrow Chemicals.
Rationale for the Transaction
1 Newco is to be controlled by Standard Bank of South Africa (“SBSA”) which is a wholly
owned subsidiary of Standard Bank Group Limited (“SBG”). SBG is a listed company and
is not controlled by any entity.
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[5]. The acquiring group believes that the acquisition of Petrow Chemicals will be an
attractive investment opportunity which will yield attractive returns.
[6]. The target group sees the proposed transaction as a financially attractive opportunity
to realize their respective investments in the primary target firm.
Parties’ Activities
[7]. Newco is a newly formed shelf company and does not provide any products or
services.2 SBG has recently acquired DairyBelle and through this acquisition is involved in
the dairy sector.
[8]. Petrow Chemicals is involved in the importation, purchase and distribution of
specialized chemical raw materials to a number of different sectors which include
pharmaceutical, neutraceutical, food, agricultural, bakery, dairy, confectionary, animal feed,
paint, personal care, wine and cosmetics.
Relevant Market
[9]. According to the Commission there is no overlap in the activities of the merging firms,
as SBSA does not have interest in the sector where Petrow Chemicals is active. The
Commission however found that there is a vertical relationship between the activities of the
merging firms in that Petrow Chemicals supplies DairyBelle with specialized raw chemicals
which the latter uses as an input in the manufacturing of dairy products. Accordingly the
Commission concluded that the transaction affects two markets, namely, the upstream
market for the supply of specialized raw chemicals in which Petrow Chemicals is active and
the downstream market for the manufacturing of dairy products in which DairyBelle is active.
Competition Analysis
[10]. The Commission found that the proposed transaction results in vertical integration of
the activities of the merging parties.
[11]. The Commission considered whether the proposed transaction would result in
foreclosure of competitors either in the upstream or downstream markets, and whether the
proposed transaction will facilitate collusion between competitors. At the hearing of the
matter, the Tribunal raised its concerns that the Commission had not conducted interviews
with those competitors of DairyBelle which are also customers of Petrow Chemicals.
[12]. The matter was postponed in order to provide the Commission with sufficient time to
conduct these interviews. The Commission filed a supplementary report to its
recommendations on 21 June 2007. In its supplementary report the Commission indicated
that it had conducted interviews with Parmalat, Clover/Danone, Lancewood and Woodlands
2 All SBG subsidiaries including SBSA are involved in the financial services sector. SBSA principal services
include retail banking, consumer credit, corporate and investment banking, investment management and life
insurance.
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Diary, all competitors of Dairybelle, who were also customers of Petrow. None of these
competitors had any concerns regarding the proposed transaction. The competitors viewed
Crest Chemicals, Tate& Lyle, Protea Chemicals and United Foods as credible and
alternative suppliers of raw chemicals to the merged entity.
[13]. With regard to the likelihood of the proposed transaction facilitating collusion, in the
event that the upstream firm gains access to the information about its competitors from the
downstream subsidiary, the Commission found that this is unlikely to occur as, both the
upstream and downstream markets are characterised by many firms.
[14]. We agree with the Commission that no foreclosure collusion concerns arise as a
result of the proposed transaction and that the transaction is unlikely to lead to a substantial
lessening or prevention of competition.
Conclusion
[15]. The transaction does not raise any public interest concerns and the transaction is
approved unconditionally.
___________________ 10 September 2007
Y. Carrim Date
Tribunal Member
N Manoim and D Lewis concurring.
Tribunal Researcher : J Ngobeni
For the merging parties : Natalie Browne (Cliffe Dekker) and Justin Balkin (Edward
Nathan Sonneburgs)
For the Commission : Marlon Dasarath and Makgale Mohlala (Mergers and
Acquisitions)
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