IN THE COMPETITION TRIBUNAL CASE NO. 116/LM/NOV07
In the matter between:
KAGISO STRATEGIC INVESTMENTS
III (PTY) LTD Acquiring firm
And
BELL EQUIPMENT SALES SA LTD Target firm
______________________________________________________________________
Panel : DH Lewis (Presiding Member), Y Carrim (Tribunal Member), M Mokuena
(Tribunal Member)
Heard on : 19 December 2007
Order issued on : 19 December 2007
Reasons issued on : 15 January 2008
REASONS FOR DECISION
APPROVAL
[1] On 19 December 2007 the Tribunal issued an order in which it unconditionally approved
the merger between Kagiso Strategic Investment III (Pty) Ltd and Bell Equipment Sales SA Ltd.
PARTIES TO THE TRANSACTION
[2] The primary acquiring firm is Kagiso Strategic Investments III (Pty) Ltd (“KSI”) which is
part of the Kagiso group. KSI is a wholly owned subsidiary of Kagiso Trust Investments (Pty) Ltd
(“KTI”), which is controlled by the Kagiso Trust.
[3] The primary target firm is Bell Equipment Sales SA Ltd (“BESSA”), a newly formed
company which has not traded. BESSA is a wholly owned subsidiary of Bell Equipment
Company SA (Pty) Ltd (“BECSA”) which is a wholly owned subsidiary of Bell Equipment Ltd
(“BEQ”).
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ACTIVITIES OF THE PARTIES
[4] The Kagiso group is an investment holding group with interests in a variety of industries,
including electrical, chemicals, communications, accounting, industrial, water and air valves,
food, financial services, engineering, security, steel, consulting, transport, fleet management,
vehicle tracking, software solutions, IT, pharmaceutical, synthetic shades, printing and media.
[5] BEQ manufactures and distributes heavy machinery in the “yellow metal” industry for
application in primarily the mining, construction and agricultural industries. The merging parties
submit that following the implementation of this merger, BESSA will engage in distribution
activities in South Africa, Namibia and Swaziland in products such as dozers, excavators, wheel
loaders, articulated dump trucks, motor graders, tractor loader backhoe, and rollers.
THE TRANSACTION
[6] In their merger notification the merging parties submitted that KSI will subscribe for
22.5% of the shareholding in BESSA, and obtain significant minority protection rights in BESSA.
BECSA will retain 70% of the shareholding in BESSA and employees within the Bell Group
Companies will collectively subscribe for 7.5% of the shareholding in BESSA which will be
funded by BECSA.
[7] At the hearing the merging parties submitted that they had decided to structure the
shareholding in BESSA slightly differently to that which was originally contemplated. In terms of
the proposed amended transaction structure, the merging parties intend that the entire
shareholding of BESSA should initially be held by BEQ, and not BECSA as was set out in the
merger notification. The remainder of the transaction remains as set out in the merger
notification except that the remaining 70% of the issued share capital, will be retained by BEQ,
instead of BECSA. This means that BEQ’s interest in BESSA will now be held directly rather
instead of BECSA. This means that BEQ’s interest in BESSA will now be held directly rather
than indirectly through BECSA as was originally contemplated by the merging parties.
[8] We accept that the proposed amended structure does not substantially change the
transaction described in the merger notification, nor does it affect the ultimate control of the
shares in BESSA. The only change that is effected by the amendment is that KSI and BEQ,
instead of BECSA will have joint control over BESSA.
[9] A simplified illustration of the post transaction structure of BESSA in the merger notification is
set out in Figure 1, and the proposed amended structure is in Figure 2 below:
FIGURE 1
2
100%
70% 22.5% 7.5%
FIGURE 2
100%
70% 22.5% 7.5%
RATIONALE FOR THE TRANSACTION
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BECSA
BEQ
KSI
(Acquiring Firm)
Bell Employees
BESSA (Target
Firm)
BEQ
KSI
(Acquiring Firm)
Bell Employees
BESSA
(Target Firm)
BECSA
[10] For the Kagiso Group this transaction is an investment strategy and an opportunity to
venture in long term assets in the manufacturing, power and infrastructure industries. This
transaction will also facilitate the Kagiso Group’s entry in the “yellow metal” industry where BEQ
is active.
[11] BESSA aims to have the best Broad Based Black Economic Empowerment (“BBBEE”)
score amongst the major local capital equipment distributors, and Kagiso Group believes that
the BBBEE credentials supplied by it will enhance the selling proposition for BESSA.
COMPETITION EVALUATION
[12] The proposed change in the structure of the transaction has no effect on competition in
the markets in which the parties operate. Furthermore, no horizontal and no vertical
relationships exist between the merging parties.
CONCLUSION
[13] We conclude that this proposed transaction is unlikely to substantially prevent or lessen
competition, and accordingly approve this merger without any conditions. There are no
significant public interest concerns, and the transaction has no negative effects on employment.
_______________ 15 January 2008
Y Carrim Date
Tribunal Member
D Lewis and M Mokuena concur in the judgment of Y Carrim
Tribunal Researcher: L Xaba
For the merging parties : Advocate Engelbrecht instructed by KPMG
For the Commission : M Mohlala
(Mergers and Acquisitions)
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