COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 11/LM/Jan08
In the matter between:
Liberty Star Consumer Holdings (Pty) Ltd Acquiring Firm
And
Finlar Foods (Pty) Ltd Target Firm
Panel: D Lewis (Presiding Member), N Manoim (Tribunal Member)
and Y Carrim (Tribunal Member)
Heard on: 12 March 2008
Order issued on: 12 March 2008
Reasons issued on: 19 May 2008
Reasons for Decision
Approval
1] On 12 March 2008 the Tribunal approved the merger between Liberty Star
Consumer Holdings (Pty) Ltd and Finlar Foods (Pty) Ltd. The reasons for approval
follow below.
The transaction and Parties
2] The transaction involves the acquisition of control by Liberty Star Consumer
Holdings (Pty) Ltd (“Liberty Star”) over Finlar Foods (Pty) Ltd (“Finlar Foods”) in a
series of interdependent and interrelated steps.
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3] Liberty Star is jointly controlled by Royal Bafokeng Libstar (Pty) Ltd 1 and Lereko
Metier Capital Growth Fund. 2 Liberty Star controls a number of companies,
however, for purposes of this transaction only the following subsidiaries are relevant
Dickon Hall Foods (Pty) Ltd, Montagu Foods (Pty) Ltd and Ribworld (Pty) Ltd and
Rialto Foods.
4] The target firm is Finlar Foods. It is controlled by Afrosi Holdings BV (”Afrosi”).
Afrosi and Finlar Foods jointly control New Nations Pizza Africa (Pty) Ltd, which in
turn controls Green Valley Food Products (Pty) Ltd (“Green Valley Food”). In turn,
Green Valley Food controls Hans Pirow Properties (Pty) Ltd. Finlar Foods is also
involved in a joint venture with Mullins Food Inc, a company registered in the United
Sates, called Mullins Food Products SA (Pty) Ltd (“Mullins SA”).
Rationale for the transaction
5] Liberty Star regards Finlar Foods as an investment that represents a good fit with
the firm’s food solutions/outofhome platform. According to the target firm the
transaction will enable it to achieve favourable BEE status.
Relevant Market
Finlar Foods, the target, is a manufacturer of valueadded red and white meat
products in the convenience food sector for clients such as McDonalds and KFC. Its
joint venture company Mullins SA also manufactures various sauces on behalf of
brand owners such as Kraft and Nestle.
6] Liberty Star, through its subsidiaries Dickon Hall and Montagu, like Finlar Foods
also acts as a contract manufacturer of sauces for brands such as “Mrs Ball’s
Chutney as well as “inhouse” brands owned by some of the large retailers. Its
subsidiary Ribworld imports chilled and frozen meat products which it supplies to
franchise chains, retailers and restaurants.
franchise chains, retailers and restaurants.
7] The Competition Commission identified two relevant product markets, the market
1 Royal Bafokeng Libstar (Pty) Ltd is ultimately controlled by The Royal Bafokeng Nation.
2 Lereko Metier Capital Growth Fund is ultimately controlled by Lereko Investors (Pty) Ltd and
Metier Investment and Advisory Services (Pty) Ltd.
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for the manufacture of sauces such as tomato, spicy mayonnaise ? and salad
dressings (excluding marinades) and the market for the manufacture of valueadded
chicken products. The geographic markets in both cases are defined as national.
8] The Commission estimates that the merged entity will have a market share of
9.26% in the market for the manufacture of sauces and 18.5% in the market for the
manufacture of valueadded chicken products.
Competition analysis
9] We will discuss each product market separately.
The market for the manufacture of sauces
10] The merging parties Dickon Hall, Montagu and Mullins SA are all competitors in
the market for the manufacturing of sauces such as mayonnaise, chutney, tomato
and salad dressings. Dickon Hall and Mullins SA are pure contract manufacturers
and do not own any brands of their own. They are thus purely service providers to
brand owners who sell their sauces to the retail trade. Montagu is a contract
manufacturer that not only manufactures sauces on contract but also owns and
manufactures its own “Montagu” brand of sauces for the retail as well as the fast food
trade. The market shares of the merging parties are Dickon Hall 6.28%, Montagu
1.39% and Mullins SA 1.59%. Post the merger the merged entity will hold a market
share of 9.26%.
11] Barriers to entry within this market are low and there are numerous players in
this market. Not only do the small independent service providers compete with each
other but they also compete with the brand owners’ large “inhouse” manufacturing
establishments.
12] Countervailing power exists in the form of large retailers who own “inhouse”
brands and who can switch their manufacturing contracts to other service suppliers
as well as the brand owners who have the ability to manufacture their brands “in
house”.
as well as the brand owners who have the ability to manufacture their brands “in
house”.
13] In light of the above we find that the transaction is unlikely to substantially
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prevent or lessen competition in this market.
The market for the manufacture of valueadded chicken products
14] Finlar Foods provide valueadded chicken products to McDonald’s, County Fair
and Woolworths. It holds a market share of 18%. Its main competitors are Famous
Brands (Steers) with a market share of 17%, Rainbow Chicken with a market share
of 29% and Astral (Early Bird) with a market share of 16%. Ribworld, the acquiring
firm, only holds a market share of 0.5%. Ribworld is mainly a distributor of imported
chicken products and its largest customers are Maxi’s and St Elmo.
15] The increase in concentration (or delta) as a result of the transaction is
insignificant, namely 18 points, which is far below the delta of 50 that competition
agencies generally regard as problematic. 3
16] The transaction is therefore unlikely to prevent or lessen competition in this
market.
Vertical integration
17] Liberty Star (through one of its subsidiaries Rialto Foods) supplies Finlar Foods
with various tomato products. Rialto holds a small market share of only 5% and it is
accordingly unlikely that the transaction would give rise to foreclosure effects.
Conclusion
18] The transaction does not raise any public interest concerns and is accordingly
approved unconditionally.
19 May 2008
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3 The HHI index measures the concentration ratio.
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Y Carrim Date
Concurring: D Lewis and N Manoim
Tribunal Researcher: R Badenhorst
For the merging parties: Metier
For the Commission: M Dasarath
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