COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 62/LM/Sep09
In the matter between:
Dip Holdco Acquiring Firm
and
New Delphi Target Firm
Panel : Y Carrim (Presiding Member), N Theron (Tribunal
Member) and A Wessels (Tribunal Member)
Heard on : 07 October 2009
Order issued on : 07 October 2009
Reasons issued on : 25 November 2009
Reasons for Decision
Introduction
[1] On 07 October 2009 the Tribunal unconditionally approved the acquisition by
DIP Holdco LLP of New Delphi. The reasons follow below.
The parties
[2] The primary acquiring firm is DIP Holdco LLP (“DIP Holdco”), a partnership
established in accordance with the laws of England. DIP Holdco is controlled
by General Motors Company (“GM”) with 50% shareholding. The remaining
50% shares in DIP Holdco are jointly held by Silver Point Capital L.P. and
Elliot Management. GM controls several firms worldwide. In South Africa, GM
controls Boco (Pty) Ltd, which in turn, controls General Motors South Africa
(Pty) Ltd (“GMSA”). DIP Holdco is a newly established firm and therefore
does not own or control any firm.
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[3] The primary target firm is NewDelphi. NewDelphi is made up of various
assets which are housed or owned by subsidiaries of Delphi Corporation
(“Delphi”). Delphi is a company incorporated in accordance with the laws of
the United States of America.
Parties’ Activities
[4] DIP Holdco is a newly formed firm which has been established for the
purposes of this transaction. GM is one of the world’s major vehicle
manufactures and it produces motor vehicles and trucks in 34 countries. Its
South African subsidiary, i.e. GMSA has two plants in Port Elizabeth which
are active in inter alia, assembling Isuzu Pick-Ups and recreational vehicles,
importing and distributing Opel and Corsa and Astra passenger vehicles,
Opel Vivaro Panel vans and busses, Cadillac passenger vehicles, Chevrolet
and SAAB passenger vehicles as well as manufacturing the Corsa Pick-Up.
Through its automotive parts and accessories division, GMSA distributes
Opel, Isuzu, SAAB and Chevrolet parts and accessories.
[5] NewDelphi manufactures and distributes a range of products and
components which are used in the automotive industry. These include wiring
harnesses, gas/electronic control modules (“ECU’s”), C&S Mechatronics,
C&S Security Products, SF Occupant Sensing, Air conditioning Kits and
Diesel Automotive Parts and accessories.
The transaction
[6] In terms of the structure of the proposed transaction, DIP Holdco intends to
acquire the remaining assets of Delphi, which are housed by NewDelphi. On
completion, NewDelphi will be controlled by DIP Holdco. On completion of the
transaction, New Delphi will be controlled by DIP Holdco.
Rationale
[7] The parties submit that Delphi has been subject to Chapter 11 U.S.
bankruptcy since 2005. The parties further submit that GM wishes to assist
Delphi to successfully emerge from bankruptcy and become successful so
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that it (Delphi) can continue supplying components critical to GM’s
manufacture of vehicles in the U.S.
Competition Analysis
[8] The Commission found that there is no horizontal overlap in the activities of
the merging parties in respect of the market for the manufacture of
automotive parts and accessories as DIP Holdco only distributes these parts
and accessories and does not manufacture them. The Commission also
assessed whether an overlap exists in the activities of the merging parties in
respect of the supply of branded (DIP Holdco) and non-branded (NewDelphi)
automotive parts and accessories.
[9] In this regard, the Commission relied on the Tribunal decision in the large
merger between General Motors South Africa (Pty) Ltd and Midas Group
(Pty) Ltd.1 In this merger, the Tribunal held that branded spare parts do not
fall in the same market as non-branded spare parts. Accordingly, the
Commission concluded that there is no overlap in the activities of the merging
parties as they do not operate at the same functional levels of the automotive
parts and accessories supply chain.
[10] There is a vertical relationship in the activities of the merging parties in that
NewDelphi supplied GMSA with ECU’s and C&S Mechatronics in the
previous financial year. The parties submit that GMSA is the only OEM in
South Africa that purchased ECU’s and C&S Mechatronics from NewDelphi.
The geographic market for the supply of these products has been defined by
the Commission as international.
[11] In the market for ECU’s NewDelphi has a market share of 4.4% and
competes with firms such Bosch (30%), Denso (26%), Conti (11%) and
Hitachi (9%). GMSA purchased ECU’s from NewDelphi which represented
about 1% of GMSA’s turnover in the business of manufacturing motor
vehicles. NewDelphi also supplied GMSA with C&S Mechatronics which
vehicles. NewDelphi also supplied GMSA with C&S Mechatronics which
represented about 5% of NewDelphi’s total turnover in the business of
supplying the products in South Africa. Its market share is 6% and it
1 Case No: 98/LM/Oct05
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competes with firms such as Tokia Rika (13%), Panasonic (12%) and Kostal
(16%).
[12] Considering the aforementioned, it is unlikely that this vertical relationship will
result in any foreclosure concerns. The Tribunal therefore finds that the
transaction is unlikely to substantially prevent or lessen competition in the
affected markets.
Public Interest
[13] The transaction does not raise any significant public interest concerns.
___________________ 25 November 2009
Y Carrim Date
N Theron and A Wessels concurring.
Tribunal Researcher : I Selaledi
For the merging parties : Bowman Gilfillan
For the Commission : X Nokele
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