COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 37/LM/Apr07
In the matter between:
Mondi Packaging South Africa (Pty) Ltd Acquiring Firm
And
Lenco Holdings (Pty) Ltd Target Firm
Panel : N Manoim (Presiding Member), U Bhoola (Tribunal Member)
and M Mokuena (Tribunal Member),
Heard on : 4 July 2007
Decided on : 4 July 2007
Reasons Issued: 18 September 2007
Reasons for Decision
Approval
1] On 4 July 2007, the Tribunal unconditionally approved the merger between
Mondi Packaging South Africa (Pty) Ltd and Lenco Holdings (Pty) Ltd. The
reasons for approving the transaction follow.
The parties
2] The primary acquiring firm is Mondi Packaging South Africa (Pty) Ltd (‘Mondi
Packaging’), a company incorporated in terms of the company laws of the
Republic of South Africa. Mondi Packaging is controlled by Mondi South Africa
Limited (‘Mondi SA’). At the time of the notification of this transaction, Mondi SA
was a wholly owned subsidiary of Anglo American plc (‘Anglo American’). 1
However, at the time of the hearing Mondi SA had listed on the JSE Securities
Exchange and was no longer a wholly owned subsidiary of Anglo American. No
single shareholder controls Mondi SA since it has been unbundled to the
existing shareholders of Anglo American. 2
3] The primary target firm is Lenco Holdings (Pty) Ltd. Lenco is jointly controlled
by Commonwealth Development Corporation Group plc (‘CDC’) (with 56%
shareholding), Brimstone Investment Corporation Limited (‘Brimstone’) (with
25% shareholding) and Lenco’s Management (‘Management’) (with 18%
shareholding). Lenco controls Lenco Packaging (Pty) Ltd (‘Lenco Packaging’),
who in turn controls Lenco Investment Holdings Limited (‘Lenco Investment’).
Lenco Investment controls various firms. 3
Description of the transaction
4] Mondi Packaging intends to acquire the entire issued share capital of Lenco
from CDC, Brimstone and the Management of Lenco. Pursuant to this
transaction, Lenco will be a wholly owned subsidiary of Mondi Packaging.
Rationale for the transaction
5] For the primary acquiring firm, the merger will enable it to diversify its product
range by growing its business into the plastic packaging sector thereby
enabling it to effectively offer complementary packaging products and complete
packaging solutions.
6] The shareholders of the primary target firm wish to exit the packaging industry
hence the proposed transaction.
1 Anglo American is a public company listed on the London Stock Exchange and the JSE
Securities Exchange which controls various companies including Anglo Coal South Africa
(‘Anglo Coal SA’), Anglo Coal Holdings Australia Limited; Anglo Platinum Limited; Kumba Iron
Ore Limited (‘Kumba’), Namakwa Sands South Africa (‘Namakwa’) and Highveld Steel and
Ore Limited (‘Kumba’), Namakwa Sands South Africa (‘Namakwa’) and Highveld Steel and
Vanadium Limited (‘Highveld’), among others. (Refer to Annexure 2 A2 for a complete list of
the subsidiaries of Anglo American.
2 Transcript p2.
3 Lenco Investment controls Lenco Corporate Finance (Pty) Ltd; Sunko Mauritius Limited;
Versapak Zimbabwe (Pty) Ltd; XacPET; and Elvinco Plastics (Pty) Ltd.
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The parties’ activities
Primary acquiring firm
7] Mondi Group operates through 6 divisions which are as follows:
8] Mondi Business Paper : an integrated exportfocused business made up of
Mondi’s hardwood forestry operations, the SilvaCel woodchip exports facility,
the Richards Bay mill and the uncoated woodfree paper businesses based at
the Merebank mill. The division provides access to world class manufacturing
expertise and a worldwide network of distribution in major markets.
9] Mondi Shanduka Newsprint : which is involved in the manufacturing of paper
used predominantly in the production of newsprint.
10] Mondi Packaging : which manufactures both coated and uncoated cartonboard.
The products covered a variety of applications including food packaging,
personal hygiene packaging and industrial packaging such as packaging
papers. Corrugated packaging papers are mainly used for handling agricultural
and commercial products. They require high quality flexographic print and
superior compression strength to ensure the protection of goods in transit.
11] Mondipak: manufactures corrugated packaging including microfluting for both
agricultural and industrial market. The package of services of Mondipak
includes boxes and graphic design, as well as laboratory testing of
performance.
12] Mondi Recycling: which is involved in the recycling of paper and board. Mondi
recycling sources and supplies recovered paper to boards and paper mills.
13] Mondi Plastics : manufactures and markets a range of plastic material handling
containers for increased storage efficiency in agriculture and other industries. It
provides plastic handling containers comprising of returnable transit packaging
containers such as ‘Jumbo bin’ which is used for storing fruits, folding large
containers, attach é lead containers which are mainly used in pharmaceutical
containers, attach é lead containers which are mainly used in pharmaceutical
supplies and electrical products, and stacking and nesting containers which are
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manufactured for mechanical handling.
The primary target firm
14] Lenco specialises in the manufacturing of rigid plastics for the packaging
industry. The company’s business includes the manufacturing and sale of
packaging products such as blowmoulded plastic containers, injection
moulded closures, formed styrene trays, tubs, polyvinyl chloride (‘PVC’) and
stretch film to the retail, agricultural and fast food products. It operates with the
following divisions:
15] Versapak : which is involved in the manufacturing of expanded polystyrene
packaging and PVC stretch film products such as clear trays, fast food trays,
stretch wrap film and bottles. It services the fast moving consumer goods, fast
food, beverage and agricultural sectors such as Steers, Wimpy, Woolworths,
Denny Mushrooms and Spar.
16] XacPET : which is involved in the manufacturing of PET products such as soft
drink plastic bottles, peanut butter plastic containers and cooking oil plastic
containers. It services entities such as Nestle, Coca Cola, Tiger Food and
Unilever.
17] Xactics/Elvinco : which uses extrusion blow and injection moulding to
manufacture bottles, containers and closures for the food, beverage, household
and toiletry industries.
Competition analysis
Horizontal assessment
18] There is no overlap in the activities of the merging parties. The packaging
products manufactured by the primary target firm come into direct contact with
the contents inside and protect or enclose products for the purpose of storage
and sale. Whereas the primary acquiring firm manufactures paper packaging
products and plastic material handling products which provide a means of
identification for the product inside and to provide a means of collating a
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number of products inside it thus making it easier for transportation, storage
and delivery. 4
Vertical Integration
19] The proposed transaction results in a vertical integration in the activities of the
merging firms in that the acquiring firm supplies corrugated packaging boxes to
Elvinco, a division of the primary target firm. The vertical integration is minute
and does not raise competition concerns in that Elvinco purchases 0.1% of
Mondi Packaging’s total corrugated box produce and purchases less than 1%
of the entire corrugated box market.
Public Interest
20] There are no public interest issues.
Conclusion
21] The merger is approved unconditionally.
________________ 18 September 2007
N Manoim DATE
Tribunal Member
U Bhoola and M Mokuena concur in the judgment of N Manoim
Tribunal Researcher : R Kariga
For the merging parties: Webber Wentzel Bowens Attorneys
For the Commission : E Ramohlola and HB Senekal (Mergers and
Acquisitions)
4 At the hearing the Commission confirmed that there is no product overlap in the activities of
the parties. The Commission had initially submitted that there might have been an overlap in
the activities of the parties with regards to plastic satchets but later found out that Mondi SA
does not produce plastic satchets at all. (See Transcript p12).
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