COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 120/LM/Nov07
In the matter between:
Diamond II Acquisition Corp Acquiring Firm
And
3Com Corporation Target Firm
Panel : D Lewis (Presiding Member), Y Carrim (Tribunal Member) and M
Mokuena (Tribunal Member)
Heard On : 19 December 2007
Decided on : 19 December 2007
Reasons Issued on : 22 January 2008
Reasons for Decision
Approval
[1] On 19 December 2007 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Diamond II Acquisition Corp and 3Com
Corporation unconditionally. The reasons appear below.
Parties
[2] The acquiring firm is Diamond II Acquisition Corp (“Diamond”) a company
incorporated in the State of Delaware, United States of America. Diamond is wholly owned
by Diamond II Holdings LLC (“Diamond Holdings”) a limited liability company organised
under the laws of the State of Delaware. In turn Diamond Holdings is controlled by Bain
Capital Investors LLC (“Bain Capital”). Both Diamond Holdings and Diamond II are special
purpose vehicles established for the purposes of this transaction. 1
1 Bain Capital has an excess of two hundred and forty companies worldwide. In South
Africa it controls Samsonite( international manufacturer and distributor of luggage),
FCI( which produces electrical connectors which are used in the automotive and
communications sectors), Sigma Coatings(which offers a comprehensive range of
products for heavy duty coatings and marine applications), Bombardier( which designs
and manufactures motorised recreational vehicles) and Edcon. Bain acquired 86.8% of
Edcon and the Tribunal approved the transaction in May 2007.
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[3] The target firm is 3Com Corporation (“3Com”), a corporation incorporated in the
State of Delaware. 3Com is a company listed in NASDAQ Global Select Market (“NASDAQ
exchange”), thus it is not owned by any firm. 2 3Com has a subsidiary H3C Technologies in
South Africa.
Transaction
[4] In terms of the proposed transaction Diamond proposes to acquire the majority of
the issued share capital of 3Com through the merger of Diamond 3Com. Postmerger,
Diamond will have a majority shareholding of 83.5% in 3Com.
Rationale
[5] Diamond, is a newly formed Delaware corporation with no prior operations and no
assets. It was established for the purpose of the proposed transaction and enabling its direct
and indirect shareholders to acquire a controlling interest in 3Com. 3Com’s rationale for
entering into the transaction is to enable its shareholders to realise a premium of their
shares of common stock based on the closing price of those shares on 27 September 2007.
Parties’ Activities
[6] Diamond Holdings and Diamond are both special purpose vehicles established
specifically for the purpose of acquiring interest in 3Com. As a result these entities do not
currently have any activities, or provide any products or services. Bain Capital on the hand is
a world wide fund management group that manages private equity, venture capital and
hedge and yields funds. 3
[7] 3Com is a global provider of enterprise and small business networking solutions that
help organisations achieve their businesses and networking requirements. It provides
integrated, secure converged network solutions for businesses of all types and sizes. These
include wireless access products, standalone and stackable switches, powerful core
switches, interoperabilitytested routers, standardsbased convergence applications and
internet protocol telephony.
Competition Analysis
internet protocol telephony.
Competition Analysis
[8] There is no overlap in the activities of the merging parties as the acquiring firm is not
involved in the activities where the primary target firm is involved. An analysis of the vertical
integration by the Commission revealed that the proposed transaction will result in minimal
2 3Com has the following shareholders owning more than 1% shares: Citadel Limited
Partnership 9.8%, Barclays Global Investors, N.A and Eric A Benhamou 1.2%. 3Com also
has one subsidiary being, H3C Technologies (South Africa) (Pty) Ltd and the other
subsidiary is incorporated in the UK being 3Com (UK).
3 For the other activities which Bain Capital is involved in through its subsidiaries see pages 45 of the
Commission’s recommendations.
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vertical relationship between the merging firms in that 3Com purchases very small quantities
of products produced by FCI in other parts of the world. We agree with the Commission that
this transaction is unlikely to substantially prevent or lessen competition in any market in
South Africa.
Public Interest Issues
[9]. There are no public interest issues.
Conclusion
[10]. Based on the above, we find that the transaction will not result in a substantial
lessening or prevention of competition in the identified markets and is accordingly approved
unconditionally.
___________________ 22 January 2008
Y Carrim Date
Tribunal Member
D Lewis and M Mokuena concurring.
Tribunal Researcher : J Ngobeni
For the merging parties : Webber Wentzel Bowens
For the Commission : David Masilela
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