COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 39/LM/Apr08
In the matter between:
Brandcorp (Pty) Ltd Acquiring Firm
and
Allied Putziger (Pty) Ltd, Target Firms
F&H Machine Tools (Pty) Ltd,
TQ&A Properties (Pty) Ltd, and
Bombshop Precinct Property Holding Company (Pty) Ltd
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal
Member) and M Mokuena (Tribunal Member)
Heard on : 11 June 2008
Order issued on : 11 June 2008
Reasons issued on : 17 June 2008
Reasons for Decision
Introduction
1]On 11 June 2008 the Tribunal approved the acquisition by Brandcorp (Pty) of
the businesses conducted by Allied Putziger (Pty) Ltd (“the Toolquip
Business) and F & H Machine Tools (Pty) Ltd as well as the respective
properties and property letting businesses from which they are run, owned by
TQ & A Properties (Pty) Ltd (“TQ & A”) and by Bombshop Precinct Property
Holding (Pty) Ltd (“Bombshop”). The reasons follow below.
The transaction and parties
2]The transaction involves the acquisition by Brandcorp (Pty) Ltd (“Brandcorp”)
of the following businesses (referred to as the “Target Firm”):
1) The Toolquip Business conducted by Allied Putziger (Pty) Ltd, 1
1 Excluding all of the shares in Amhold (Pty) Ltd
1
2) The business conducted by F & H Machine Tools (Pty) Ltd (”The F &
H Business”), 2
3) The properties and property letting businesses, TQ&A Property and
Bombshop Property, from where the Toolquip Business and F& H
Business are being conducted. 3
3]Brandcorp is a wholly owned subsidiary of Brandcorp Holdings (Pty) Ltd
which is a subsidiary of Ethos Private Equity Fund V. Brandcorp controls
various subsidiaries one of which is Matus (Pty) Ltd a company active within
the same industry as the target businesses Toolquip and The F & H
Business.
Rationale for the transaction
4]Brandcorp intends to diversify its business and regards the target firm as a
niche business which is complementary to its existing businesses. According
to the sellers of the target firm the disposal is in the best interest of
stakeholders.
Effect on Competition
5]The target business Toolquip and the acquiring firm Brandcorp, through its
subsidiary Matus, are both active in the broad market for the wholesale and
distribution of engineering and industrial products to industrial endusers and
resellers. Toolquip supplies the engineering and industrial market with fast
moving consumables, conventional machine tools and basic computerised
numeric controlled machine tools. Matus primarily distributes a broad range
of engineering and industrial products to industrial and DIY resellers; its
product range includes products such as garden tools, hardware tools, power
tools, measuring tools and many more. Although they supply products which
can be used for similar applications in some instances, the products
themselves differ and accordingly their customer base is different. As
indicated above Toolquip supplies engineering and manufacturing endusers
while Matus focuses on DIY and industrial resellers.
while Matus focuses on DIY and industrial resellers.
2 Excluding all of the shares in Holgre Investment Holdings (Pty) Ltd
3 Erf 544 and Erf 545, Selby Extension 22 owned by TQ&A Properties (Pty) Ltd and Portion 1
of Erf 19 and Erf 20, Crown City Extension 6 owned by Bombshop Precinct Property Holding
(Pty) Ltd
2
6]Within the broad market, the market for importing and distribution of
engineering and industrial products, the merging parties will hold a market
share of 7.37%. Although we found that the merging parties supplied
different categories of customers and therefore do not compete we
nevertheless also considered the horizontal overlap in each product category
based on the technical nature of the products. Within each of the narrowly
defined product markets the merging parties’ combined estimated market
shares, based on sales, are below 15% and the increase in concentration
within the various product categories is less than 50 points. The Commission
in its investigation consulted with various customers and competitors of the
merging parties who also indicated that there are numerous suppliers
competing within the narrow product markets.
7]The second target business, the F&H Business, imports and distributes high
technology, specialised industrial machine tools used in the ma nufacturing
sector. The parties indicated that none of the activities of the F & H Business
overlap with those of Matus.
8]There is a vertical relationship between Toolquip and Matus. Toolquip holds a
nonexclusive master agency for Mitutoyo precision measuring instruments
and Matus holds a subagency. 4 Toolquip distributes Mitutoyo products
through Matus and various other subdistributors and resellers into Africa.
The merging parties indicated that the agency agreements are unaffected by
the acquisition. Since the agencies are nonexclusive, the merger is unlikely
to give the merged firm pricing power over the Mitutoyo product, post merger.
9]In light of the above w e find that the transaction is unlikely to substantially
prevent or lessen competition in the relevant product markets .
Public Interest
prevent or lessen competition in the relevant product markets .
Public Interest
10]The transaction does not raise any significant public interest concerns.
4 A competitor of Toolquip, RGC Engineering (Pty) Ltd, is the only other nonexclusive
distributor of Mitutoyo measuring product in Sout Africa.
3
____________________ 17 June 2008
N Manoim Date
Y Carrim and M Mokuena concurring.
Tribunal Researcher: R Badenhorst
For the merging parties: Edward Nathan Sonnenbergs
For the Commission: V Ranchod
4