COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 58/LM/May08
In the matter between
Adcorp Staffing Solutions (Pty) Ltd Primary Acquiring firm
And
Staff U Need (Pty) Ltd Primary Target Firm
Panel : D Lewis (Tribunal member); N Manoim (Tribunal member) and
L Reyburn (Tribunal member)
Heard on : 30 July 2008
Decided on : 30 July 2008
Reasons Issued : 23 September 2008
Reasons for decision
Approval
[1] On 30 July 2008 the Competition Tribunal issued a Merger Clearance
Certificate approving the merger between Adcorp Staffing Solutions (Pty) Ltd and
Staff U Need (Pty) Ltd unconditionally. The reasons for the approval appear below.
Parties
[2] The primary acquiring firm is Adcorp Staffing Solutions (Pty) Ltd (“Staffing”), a
private company incorporated in the Republic of South Africa. Staffing is a wholly
owned subsidiary of Adcorp Holdings Ltd (“Adcorp”), a public company listed on the
JSE Securities Exchange. Adcorp’s major shareholders are Investec Asset
Management (17.96%), Old Mutual Asset Management (11.31%), Allan Gray Asset
Management (11.16%), Sanlam Asset Management (7.63%) and RMB Asset
Management (5.70%).
1
[3] The primary target firm is Staff U Need (Pty) Ltd (“SUN”), a private company
incorporated under the laws of the Republic of South Africa. SUN’s shareholders are
B.C. Visagie (12.5%), M.J. Chapman (12.5%), Zondo Family Trust (27.5%), Themba
Family Trust (27.5%) and Dithomo Labour Services (Pty) Ltd (20%).
Transaction
[4] In terms of the structure of the transaction, Staffing intends to acquire the
businesses of SUN and Dithomo Labour Services (Pty) Ltd (“Dithomo”). The parties
submit that the acquisition of Dithomo does not constitute a notifiable merger as it
falls below the required threshold for intermediate mergers. 1 The Commission
nevertheless considered Dithomo in its analyses of the effect of the merger on
competition. On completion of the transaction, the businesses of SUN and Dithomo
will be owned by Staffing.
Rationale
[5] Staffing submits that this transaction will enhance Adcorp’s position as a
leading provider of flexible staffing solutions in the South African market and also
benefit the Adcorp Group greatly given SUN’s particular niche industry. Further, the
business of SUN complements the activities of the existing staffing solutions offered
by Adcorp.
[6] For Sun the rationale is to extend the presently limited opportunities for
growth, which are enhanced by accessing the greater resources available to a large
group.
Parties’ Activities
Acquiring Group
1 In the previous financial year Dithomo’s annual turnover was R 22 870 361 and its asset value was
R 3 543 594.
2
[7] Adcorp and its subsidiaries are involved in providing comprehensive business
services in human capital management. These services include permanent
recruitment, effective recruitment search, response handling, mass response
handling, flexible staffing and recruitment advertising. For purposes of assessing the
effect of the proposed transaction on competition, the only relevant activity of the
merging parties is the recruitment and placement of flexible staffing.
[8] Recruitment and placement of flexible staffing entails the recruitment and
placement of part time, casual and contract workers. Flexible staffing solutions
provided by the acquiring firm focus on areas such as, inter alia, recruitment and
placement of blue collar workers on a contract basis as well as recruiting and placing
flexible staffing solutions for call centre operations and management for professional
services entities.
Primary Target Firms
[9] Sun employs flexible staffing in professional, skilled, semi-skilled and
unskilled capacity for the power generation industry.
[10] Dithomo carries on the business of recruiting, selecting, training and supplying
temporary staff to the power generation and mining industries2.
Relevant Market
Relevant Product Market
[11] Flexible staffing solutions entail the recruitment and placement of part time,
casual and contract workers. Flexible staffing solution is defined as temporary staff
where the periods of employment are defined and could range from three weeks to
three months.
[12] The acquiring firm provides flexible staffing solutions in the following sectors:
manufacturing, food and beverages, engineering, mining, pharmaceutical,
telecommunications, financial services, medical as well as state owned enterprises.
2 The parties did not deem it necessary to ascertain Dithomo’s market share in the mining industry as
it’s turnover is very minimal, i.e. R 3 839,885.
3
The primary target firms, on the other hand, provide flexible staffing solution in the
power generation and mining sectors only.
[13] In defining the relevant product market, the Commission considered whether
flexible staffing constitutes a single market or whether the market should be further
delineated in terms of the skills and the sectors where employees are placed. In this
regard, the Commission found that when the market is defined as a single market,
the market shares are diluted.
[14] The Commission therefore defined the market for flexible staffing solutions on
a narrow basis and identified overlaps in the activities of the merging parties in the
following sectors: power generation sector, manufacturing sector and financial
intermediary, insurance, real estate, and business sector (“FIRB”)3.
Relevant Geographic Market
[15] The parties submit that flexible staffing is generally not mobile and is confined
to a specific region due to the nature of the job. The geographic overlap for flexible
staffing solutions for power generation and the manufacturing industries is in
Gauteng and the geographic overlap for the FIRB industry is in Gauteng and
Mpumalanga.
Competition Analysis
[16] The merging parties’ combined post-merger market share for flexible staffing
solution for the power generation industry is estimated to be 12.54% in Gauteng (this
includes market share of Dithomo). For the manufacturing industry the estimated
market share is 4.70% and for the FIRB industry in Gauteng 7.02% and in
Mpumalanga 0.16%. This transaction is unlikely to substantially prevent or lessen
competition in the flexible staffing solution market as the post merger market shares
of the merging parties remain low.
[17] The merging parties compete with firms such as Workforce, Transman and
Kelly. In addition, the staffing industry has seen a number of firms entering the
Kelly. In addition, the staffing industry has seen a number of firms entering the
market in the last 3 months. These firms include, inter alia, Letsema Placement
3 This is for call centre workers.
4
Team, Corporate Intervention Services, Dakalo Recruitment Agency and Murray and
Roberts Engineering Solutions.
Public Interest
[18] The transaction does not give rise to any public interest issues and is
approved without conditions.
___________________ 23 September 2008
N Manoim Date
Tribunal Member
Concurring: D Lewis and L Reyburn
Tribunal Researcher : I Selaledi
For the merging parties : Roodt Inc.
For the Commission : Linda Chung (Mergers & Acquisitions)
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