COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 83/LM/ Dec09
In the matter between:
Business Venture Investments No 1347 Acquiring Firm
And
Astor Group (Pty) Ltd and 3 Others Target Firm
Panel : N. Manoim (Presiding Member ),
Y Carrim (Tribunal Member )
and M Mokuena (Tribunal Member)
Heard on : 18/12/2009
Order issued on : 18/12/2009
Reasons issued on : 18/01/2010
Reasons for Decision
Approval
[1] On 18 December 2009 the Tribunal unconditionally approved the merger
between the acquiring firm, Business Venture Investments (herein referred to
as “Newco”), and the target firms; Astor Group, Astor Cash and Carry
Express No. 1, Astor Cash and Carry Express No. 2 and Astor Cash and
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Carry Express No.3 (collectively referred to as “Astor”). The reasons for the
decision follow below.
The Transaction
[2] The primary acquiring firm, Newco is a wholly owned subsidiary of Massmart
Holdings Limited, which is in turn also a wholly owned subsidiary of Masscash
Holdings. The primary target firm is Astor, currently housed in the four
abovementioned stores located in Johannesburg and Pretoria CBDs, which
are family owned . 1
[3] In terms of the structure of the proposed transaction, firstly the business of
the Astor Group of Companies will be transferred as a going concern to
Newco. Then, Masscach will acquire 75% of the issued share capital of
Newco, and the remaining share capital will be shared between the Trusts
which represent the interests of the families that currently control Astor; i.e.
the CATG Share 2 Trust (12.5%), the Syngy Share 2 Trust (4.5%) and the
Anne Lambropoulos Family Trust (8%). It has been agreed among the parties
that the Trusts together will have material influence. Hence Masscash and
the Trusts will have joint control over Newco post merger.
The Rationale
[4] Masscash regards Astor as a successful independent retailer in the
Johannesburg CBD which will enable Masscash to gain exposure, skill and
growth potential in the growing retail mass market where Massmart is under
represented.2 In addition Masscash believes that it will benefit from Astor’s
management experience in this sector, since they will remain closely involved
in the business post merger.
1 Herein also referred as Astor Newtown, Astor Express Noord Street, Astor Express Jeppe Street and
Astor Express Pretoria. These are owned by the Trohopulos family, Ontong and Lambropoulos
families.
2 Massmart, through Masscash, is seeking to extend its participation across the supply chain into the
retail grocery segment, particularly in the growing massmarket in urban and periurban areas where
large incumbents such as Shoprite, Pick n Pay and Spar are consolidating their respective market
shares.
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[5] At the hearing Sydney Ontong, the managing director of Astor explained that
Astor was forced to sell due to a severe fraud that took place in the business.
Ontong explained further that various options were considered including
selling to some of the other retail chains, as well as Masscash, which made
the most attractive offer.
The parties and their activities
[6] Newco is a newly formed company which has not traded. Massmart is active
throughout South Africa in both the wholesale and retail of grocery products,
and has four divisions namely; (i) Masscash which is active in wholesaling
and retailing of cosmetics, toiletries, hair products, basic grocery products and
some of general merchandise; (ii) Masswarehouse which comprises the
Makro chain of large wholesale club outlets which market a broad range of
food, liquor and general merchandise; (iii) Massdiscounters which comprises
retail discount stores offering a wide range of general merchandise and non
perishable groceries to end consumers 3; and (iv) Massbuild which sells
hardware and home improvement products, and building material 4.
[7] Astor through Astor Newtown is active, however to a small extent, in
wholesale grocery sales, and through Astor Noord, Astor Jeppe and Astor
Pretoria, focuses in the retail of grocery products to lower end consumers.
[8] At the hearing Jay Currie, the retail director of Masscash and member of the
Massmart executive committee, explained that within Massmart and
Masscash there isn’t a great skill in the type of retail sector which Astor
specialises in. 5 Massmart’s food and grocery offering to the lowerend
consumer is predominantly at the wholesale level, which involves the bulk
sale of groceries to smaller retailers, who onsell to consumers. 6 Astor
sale of groceries to smaller retailers, who onsell to consumers. 6 Astor
Newtown is also engaged in wholesale grocery sales, however to a small
extent.
3 These stores trade under the names “Game” and Dion Wired.
4 Massbuild operates through Builders Express, Builders Warehouse and Builders Trade Depot chains.
5 Refer to pg. 21 of the transcript.
6 Refer to pg.5 of the merging parties’ competitiveness report.
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Competition Analysis
[9] The Commission assessed the impact of the proposed merger in the retailing
of grocery products to customers in the LSM 26 categories within a 5km
radius of the Astor stores in Johannesburg, and the wholesale grocery market
within 4050km radius 7 of Astor Newtown, where there is a horizontal overlap.
Nonetheless Massmart does not have a comparable retail offering as Astor 8.
[10]To the extent that Astor Newtown is also engaged in some wholesale grocery
sales, its activities overlap with Massmart’s existing grocery wholesale
activities in the Gauteng area. 9 However, this market is highly competitive and
Astor’s market share is negligible. At the hearing Currie unequivocally stated
that Massmart does not regard Astor as a threat, nor a competitor, from a
wholesale perspective, furthermore that the proposed merger is not material
for Massmart from a wholesale point of view.
Horizontal Analysis
[11]In the retail market, Astor has a combined market share of 5.3% 10, and
Massmart through Jumbo has 2.3%. Post merger the merging parties will
have a combined market share of 7.6% and continue to face competition from
other retailers such as Pick n Pay, Shoprite, Boxer, Fontana Spar, Park City
Supermarket, and others. 11
[12]In the wholesale grocery market within the specified radius of 40km to 50km
of Astor Newtown, Massmart has approximately 30% market share, and Astor
Newtown has about 2% market share. The structural change post merger will
7 During its investigation, the Commission asked the merging parties to indicate if there were any
stores which fall outside of the 50km radius but within 60km radius, and at the hearing the merging
parties indicated that there were 3 stores; CBW Store in Pretoria West, CBW Store in Vereeniging and
Makro is Silverlakes.
8 Massmart’s Jumbo Crown Mines, although a core wholesaler, makes limited and incidental sales to
endconsumers in the LSM 2 to 6 categories and is situated within 5km of Astor’s Express stores in
Johannesburg. However Astor does not consider Jumbo among its retail competitors.
9 Astor Newtown is largely active in retail and its participation in wholesale is very limited.
10 Astor Newtown has a market share of 2.6%; Jeppe has 1.5%; and Noord has 1.2%.
11 The complete list of competitors that compete with the merging parties in this market is contained in
annexure C5 of the merger record.
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therefore be insignificant as there is very little market share accretion post
merger.
Vertical Analysis
[13]The merging parties’ activities overlap vertically in that Astor Newtown
currently sources some of its products from Massmart’s Jumbo. However it is
unlikely that this vertical relationship can raise significant customer
foreclosure and input foreclosure as this does not exist premerger, and
unlikely to arise post merger due to the small market share accretion post
merger.
[14]In light of the above, we find that the transaction would not substantially
prevent or lessen competition in any of the relevant markets.
CONCLUSION
[15] There are no significant public interest issues.
____________________ 18/01/2010
N Manoim DATE
Y Carrim and M Mok uena concurring
Tribunal Researcher: Londiwe Senona
For the merging parties: Cliffe Dekker Hofmeyr
For the Commission: Thabelo Ravhugoni
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