COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 22/LM/Feb08
In the matter between:
Newco Acquiring Firm
And
Squires Foods (Pty) Ltd Target Firm
Panel : Y Carrim (Presiding Member), M Mokuena (Tribunal
Member) and U Bhoola (Tribunal Member)
Heard on : 09 April 2008
Order issued on : 09 April 2008
Reasons issued on : 29 May 2008
Reasons for Decision
Approval
1]On 9 April 2008 , the Tribunal approved the merger between Newco and
Squires Food (Pty) Ltd. The reasons for approval follow.
The transaction and parties
2]The transaction involves the acquisition by Newco of 20 restaurant
businesses from Squires Foods (Pty) Ltd (“Squires Foods”) as going
concerns. Sansquires (Pty) Ltd is selling nine restaurants, Squires Foods
seven, Squires Pietersburg (Pty) Ltd one, Squires Kimberly (Pty) Ltd one,
Sunset Bay Trading (Pty) Ltd one and Introprops 1017 CC one restaurant. 1
3]The Primary acquiring firm, controlled by Retailcorp LLC, is a newly acquired
shelf company incorporated in the company laws of South Africa. Dubai
1 Although the acquisition of the businesses of Sunset Bay and Itroprops constitute small
mergers as they are not linked with the Squires Foods transaction, the Commission decided
to consider them as part of the transaction in order to analyze the effect on competition.
Sansquire, Squires Kimberly and Squires Pietersburg are all controlled by Squires Foods.
1
based company Retailcorp LLC will hold 50% in Newco and the remaining
shares will be held by Nadesons (Pty) Ltd and Mr H Adams jointly holding
30% and a consortium made up of existing shareholders of Squires Foods
(Pty) Ltd jointly holding the remaining 20% shareholding in Newco.
Rationale for the transaction
4]The transaction constitutes the first step in a joint venture between Retailcorp
and the shareholders of Squires Foods. The Primary acquiring group wishes
to take the Squires Brand to Dubai while at the same time establish its retail
apparel brand, as a new entrant, in South Africa. It is the view of the merging
parties that the transaction will allow them to maximise the synergies
between the Retailcorp and Squires Foods’ businesses and to leverage the
intellectual capital held by each.
Impact on competition
5]The transferred businesses are restaurant businesses located in casinos,
entertainment complexes and shopping centres in a number of geographic
locations throughout South Africa. 2 The geographic market is defined as the
local market; customers tend to dine in the areas close to where they stay.
The restaurants are situated at the V&A Waterfront in Cape Town, Sun City
Casino and Resort, the Boardwalk in Port Elizabeth, the Wild Coast Casino
and Hotel near Port Edward, Meropa Casino near Polokwane, Kimberley
Casino, Carnival City Casino in Brakpan, and in various suburbs of
Johannesburg.
6]The acquiring group does not operate any restaurants in South Africa. There
is thus no overlap in the activities of the acquiring and the target firms within
South Africa. 3
2 For a list of businesses see Rekord page 109
3 As a consequence of the amalgamation of the businesses of the target firms (Squires
Foods, Introprops and Sunset Bay) there is an overlap in respect of the provision of
restaurant services within the target firms. However, the businesses are situated in different
geographic markets and there is accordingly no overlap in the activities of the primary target
firms.
2
7]The target firm is also a tenant of the primary acquiring firm in the V&A
Waterfront.4 However the vertical effect of this relationship on competition is
minimal since the income received from the primary target for rentals was
less than 1% of the acquiring firms total rentals received. The vertical
relationship between the merging parties is therefore unlikely to result in
foreclosure.
8]The transaction is thus unlikely to substantially prevent or lessen competition
in the relevant product markets.
Conclusion
9]There are no significant public interest issues and we accordingly approve
the transaction without conditions.
____________________ 29 May 2007
Y Carrim Date
M Mokuena and U Bhoola concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: Hofmeyr Herbstein Gihwala Inc
For the Commission: M Mohlala and M Matsimela
4 The target business is Morton’s on the Wharf.
3