COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 05/LM/Jan08
In the matter between
Powertech Properties and Investments (Pty) Ltd Primary Acquiring firm
And
ABB Powertech Transformers (Pty) Ltd Primary Target Firm
Panel : D Lewis (Tribunal Member); T Orleyn (Tribunal Member) and N
Manoim (Tribunal Member)
Heard on : 26 March 2008
Decided on : 26 March 2008
Reasons Issued : 13 May 2008
Reasons for Decision [NONCONFIDENTIAL]
Approval
[1] On 26 March 2008 the Competition Tribunal issued a Merger Clearance Certificate
approving the merger between Powertech Properties and Investments (Pty) Ltd and ABB
Powertech Transformers (Pty) Ltd unconditionally. The reasons appear below.
Parties
[2] The primary acquiring firm is Powertech Properties and Investments (Pty) Ltd
(“Powertech Properties”), a company incorporated under the laws of the Republic of South
Africa. Powertech Properties is a wholly owned subsidiary of Allied Electronics Corporation
Ltd (“Altron”). 1
[3] The primary target firm is ABB Powertech Transformers (Pty) Ltd (“ABB
Powertech”), a company incorporated under the laws of the Republic of South
Africa. ABB Powertech is jointly controlled and owned by Powertech Properties
and ABB Holdings (Pty) Ltd (“ABB SA”).2
Transaction
1 Altron is a public company listed in the Johannesburg Stock Exchange. It controls the following three firms,
Allied Technologies Ltd (Altech”) Bytes Technology Ltd (“Bytes”) and Powertech.
2 ABB Powertech controls Desta Power Matla (Pty) Ltd (“Desta Power”) a company incorporated in accordance
with the laws of South Africa.
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[4] In terms of the proposed transaction Powertech Properties seeks to increase its
shareholding in ABB Powertech from 49% of the shares to 100%, by acquiring the remaining
shares currently held by ABB SA.
Rationale for the Transaction
[5] The merging parties submit that for both Powertech and ABB Group the rationale for
the transaction is to facilitate the inclusion of an empowerment partner in the business of
ABB Powertech. Furthermore the parties submitted that the acquisition by Powertech of ABB
SA’s interest in ABB Powertech will pave the way for Powertech to on sell a 25.1% interest
in ABB Powertech to black economic empowerment investors.
Parties Activities
[6] Powertech Properties is a holding company for Powertech Technologies investment
in ABB Powertech and does not conduct any business operations. Altron, through its
subsidiaries namely Altech, Bytes and Power Technologies is involved in a variety of
activities. Through Altech, Altron is involved in the design, development, convergence,
manufacturing, installation and distribution of telecommunications equipment, multimedia
systems, information technology solutions, electronics components, cellular telephony and
industrial electronic products. Through Bytes, it provides a wide range of products including
technical skills and services to support enterprise wide IT infrastructure and
telecommunications across Southern Africa and United Kingdom. Through Powertech
Technologies, it is involved in cable and cable accessories, transformers batteries and DC
power systems, as well as accessories.
[7] ABB Powertech is a supplier of power transformer and associated products to the
African and worldwide markets. 3 Desta Power a subsidiary of ABB Powertech, supplies a
small, medium and large distribution transformers and miniature substations
Competition Analysis
Competition Analysis
[8] According to the Commission there is an overlap in the activities of the merging firms
as far as the acquiring firm has prior shareholding in the target firm. The Commission
analysed the horizontal overlap and came to the conclusion that the overlap will not result in
an increase of market share or change in the structure of the market. We agree with the
3 The variety of transformers and associated products supplied by ABB Powertech are as follows: three phase
unit, single phase unit, auto transformers, shunt reactors, rectifies transformers including tailor made
transformers to meet customer exact demands and condenser bushing.
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Commission that the merger raises no horizontal issues as both firms held an interest in the
same asset which will now be wholly owned by Powertech instead of partially owned. Since
Powertech is not invested in any other competing company the merger neither changes its
incentives or that of the target firm.
[9] The Commission also found that there is a vertical relationship between the merging
firms in that ABB Powertech has on occasion purchased certain products from companies
within the acquiring firm. An examination of the vertical effects by the Commission revealed
that ABB Powertech has occasionally purchased copper strip and insulating materials from
Aberdare Cables (Pty) Ltd (“Aberdare”) and Powertech Callidus (Pty) Ltd (“Callidus”)
respectively. According to the Commission the copper strip purchased from Aberdare
represents [CONFIDENTIAL] of Aberdare’s total sale of copper strip and [CONFIDENTIAL]
of ABB Powertech’s total purchases of copper strip. The Commission also found that the
insulating materials purchased from Callidus represents [CONFIDENTIAL] of Cadillus total
sale of insulating materials and [CONFIDENTIAL] of ABB Powertech’s total purchases of
insulating materials. The Commission is of the view that the above figures are insignificant to
raise any foreclosure concerns. We therefore agree with the Commission’s conclusion that
the proposed transaction is unlikely to substantially prevent or lessen competition.
Public Interests
[10] There are no public interest issues
Conclusion
[11] Based on the above the transaction will not result in a substantial lessening or
prevention of competition in the identified markets and is accordingly approved
unconditionally.
___________________ 13 May 2008
N Manoim Date
Tribunal Member
D Lewis and T Orleyn concurring
Tribunal Researcher : J Ngobeni.
For the merging parties : Bowman Gilfillan
For the Commission : Themba Mahlangu
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