COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 49/LM/Jun09
In the matter between:
Masscash Holdings (Pty) Ltd Acquiring Firm
and
13 Score Supermarket Stores Target Firms
Panel : N Manoim (Presiding Member), Y Carrim (Tribunal
Member) and A Wessels (Tribunal Member)
Heard on : 07 September 2009
Order issued on : 07 September 2009
Reasons issued on : 25 November 2009
Reasons for Decision
Introduction
[1] On 07 September 2009 the Tribunal approved the acquisition by Masscash
Holdings (Pty) Ltd of 13 Score Supermarkets owned and Operated by Pick ‘n
Pay Retailers (Pty) Ltd and/or its wholly owned subsidiary. The reasons
follow below.
Parties
[2] The primary acquiring firm is Masscash Holdings (Pty) Ltd (“Masscash”), a
firm incorporated under the laws of the Republic of South Africa. Masscash is
a wholly owned subsidiary of Massmart Holdings Ltd (“Massmart”), a public
company listed on the JSE. Massmart is not controlled by any firm.
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[3] The primary target firms are 13 Score Supermarkets situated in Mpumalanga,
North West, Gauteng, Limpopo, Northern and Western Cape as well the Free
State provinces. These stores are owned and operated by Pick ‘n Pay
Retailers (“Pick ‘n Pay”) and/or its wholly owned subsidiary, namely, Score
Supermarkets (Trading) (Pty) Ltd.
Parties’ Activities
[4] Massmart is a retailer of grocery products, liquor and general merchandise
throughout South Africa. Massmart provides its activities through four
divisions, namely, Massdiscounters, Masswarehouse, Massbuild and
Masscash.
[5] The primary target firms are involved in the retailing of grocery products to
consumers in the LSM 2-5 categories. The grocery items the target firms offer
are grocery, butchery, bakery, fruit and vegetables, deli and non-edible
consumables.
Description of the transaction
[6] This transaction involves Masscash acquiring 13 stores known as Score
Supermarkets as a going concern. These stores are owned and operated by
Pick n Pay and/or its wholly owned subsidiary, i.e. Score Supermarkets. On
completion of the transaction, Masscash will solely control the primary target
firms.
Rationale
[7] Masscash submits that in order for it to compete more strongly with major
retailers for customers in the LSM 2-5 categories, it has embarked on a
strategy to extend its participation across the supply chain into the retail
segment. This strategy involves the “Saverite model” as well as the
acquisition of independent traders with proven success in the lower-end retail
market.
[8] According to Pick n Pay, Score Supermarkets have not proven to be
profitable over recent years and therefore it has embarked on a strategy of
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converting these stores into Pick n Pay Franchise Family Stores. However,
Pick n Pay submits that the Score Supermarkets stores in this transaction
have been identified as being unsuitable for conversion and hence the
decision to dispose them to an outside party.
[9] The Commission also received a submission from the South Africa
Commercial, Catering and Allied Workers Union (“ SACCAWU”) in relation to
this acquisition. SACCAWU’s submission was that, inter alia, that there is no
evidence that the target firms are failing which necessitate that they be
disposed of. SACCAWU went on to further submit that the sole intention of
this merger is to destroy the Score Supermarkets as competitors to
Masscash.
[10] According to the Commission, the merging parties were requested to provide
it with results of any further investigation into the suitability of the stores being
sold to Masscash for conversion. The merging parties’ replied by submitting
that there are no documents prepared by either Score Trading or Pick ‘n Pay
which set out the reasons why the primary target firms were not suitable for
conversion. The Commission was therefore unable to come to the conclusion
on whether the rationale submitted by Pick ‘n Pay was true as no
documentation was provided.
[11] During the hearing, we asked the merging parties as to whether or not the
transaction was considered at any other level in the Pick ‘n Pay group and if
documented, that the Tribunal be provided with that documentation. The
merging parties’ response was that the decision to sell the primary target
firms ultimately lay with Score Trading and accordingly the transaction was
discussed only at this level. We were therefore as a result, unable to
ascertain the validity of the rationale tendered by Pick ‘n Pay.
Competition Analysis
[13] The activities of the merging parties overlap in respect of the retailing of
[13] The activities of the merging parties overlap in respect of the retailing of
grocery products in the LSM 2-5 categories. With regard to the relevant
geographic area, the Commission found that the activities of the merging
parties overlap only in two areas, namely, Seshego (Limpopo) and New
Cross Roads (Western Cape).
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[14] The merging parties’ post-merger market shares are 3.3% and 0.57% in
Seshego and New Crossroads respectively. Competitors in this market
include firms such as Shoprite, Usave, Superspar, Checkers etc . The
Commission concluded that this transaction is unlikely to substantially lessen
or prevent competition in the affected areas as the merging parties’ combined
post-merger markets shares remains low.
[15] In light of the low post merger market shares of the merging parties, the
Tribunal finds that the proposed transaction is unlikely to substantially prevent
or lessen competition.
Public Interest
[16] The transaction does not raise any significant public interest concerns.
___________________ 25 November 2009
N Manoim Date
Y Carrim and A Wessels concurring.
Tribunal Researcher : I Selaledi
For the merging parties : Edward Nathan Sonnenbegs
For the Commission : T Ravhugoni
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