COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 03/LM/Jan10
In the matter between:
Grindrod (South Africa) (Pty) Ltd Acquiring Firm
And
Fuelogic (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member), and
Andreas Wessels (Tribunal Member)
Heard on : 07 April 2010
Order issued on : 07 April 2010
Reasons issued on : 04 May 2010
Reasons for Decision
Approval
[1] On 07 April 2010 the Competition Tribunal (“Tribunal”) approved the
acquisition by Grindrod (South Africa) (Pty) Ltd of Fuelogic (Pty) Ltd.
The reasons for approval follow below.
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The parties and the transaction
[2] The primary acquiring firm is Grindrod (South Africa) (Pty) Ltd
(“Grindrod SA”). Grindrod SA is 79.9% owned by Grindrod Freight
Services (Pty) Ltd (“Grindrod Freight”); the remaining 25.1% of the
shares in Grindrod SA are held by Calulo Petrochemicals (15.05%) and
Adopt-a-School Foundation (10.05%). Grindrod Freight is a wholly
owned subsidiary of Grindrod Limited (“Grindrod”). Grindrod’s group
profile consists of its shipping, trading, freight services and financial
services divisions. The division relevant for the purposes of this
transaction is the freight services division.
[3] The target firm is Fuelogic (Pty) Ltd (“Fuelogic”). Fuelogic’s majority
shareholder is Imperial Holdings (Pty) Ltd (“Imperial”), which holds an
effective (and controlling) 57,32% (through Imperial directly and
indirectly through its BEE vehicle Ukhamba Holdings (Pty) Ltd) stake in
Fuelogic. Imperial also has an investment in Tanker Services (Pty) Ltd
(“Tanker Services”), a competitor of Fuelogic (also see paragraph
below). Fuelogic’s business activities include the transportation by road
of petrol, diesel, illuminating paraffin and liquefied petroleum gas (LPG)
predominantly in South Africa.
[4] The proposed transaction consists of two phases of shareholder
agreements, in order to affect the sale of 100% of the ordinary shares
of Fuelogic to Grindrod SA from various direct and indirect
shareholders.1
The Rationale
[5] Grindrod’s rationale for the proposed acquisition is to expand its
business within and outside of South Africa’s borders. It further submits
that the transaction will place it in a position to more effectively
compete against the main service providers of petrochemical
transportation within the borders of South Africa. It further submits that
1 A full description of the proposed transaction, including diagrams
1 A full description of the proposed transaction, including diagrams
of how the transaction will be implemented, is provided on pages 6 to
9 of the Competition Commission’s report.
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the proposed transaction would maintain Fuelogic’s level 3 BEE
contributor status.
[6] From Fuelogic’s perspective, its majority shareholder, Imperial, wishes
to exit its investment in the company, as Imperial has two investments
in the bulk liquid fuel transportation sector, being its above-mentioned
shareholding in Fuelogic and its investment in Tanker Services (see
paragraph above). The latter two companies compete directly with
each other for contracts and this has created conflict between the two
companies. This conflict together with the Imperial Boards’ concerns
regarding the competition implications of the shareholding in
competitors has resulted in Imperial deciding to exit its investment in
Fuelogic.
The parties and their activities
[7] Both the acquiring and the target entities compete for tenders in order
to render an outsourced secondary distribution function to oil
companies, i.e. both companies are involved in road based
transportation and secondary distribution of petrochemicals and the
products and services of both companies are considered to be
substitutable with each other.
[8] Therefore, a horizontal overlap exists between the activities of the
merging parties in respect of the provision of road based petrochemical
transportation solutions to customers within and outside the borders of
South Africa.
The relevant market and the impact on competition
[9] We shall assess the competition effects of the proposed deal in a
national market for outsourced, road based, secondary distribution of
petrochemicals.2
2 See, for example, Case No: 61/LM/Jul05: the large merger between
Imperial Group (Pty) Ltd and Bulktrans (Pty) Ltd where the Tribunal found that
“large oil companies tender for the distribution of petrochemicals on
a nationwide basis.”
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[1] Table 1 below provides the market shares of the merging parties and
their competitors in a national market for the provision of outsourced,
road based, secondary distribution of petrochemicals.
Table 1 Estimated market shares in a national market for the
provision of outsourced, road based, secondary
distribution of petrochemicals
Name Market Share (%)
Grindrod <1
Fuelogic [10 – 20]
MERGED ENTITY [10 – 20]
Unitrans [40 - 50]
Tanker Services [10 - 20]
Cargo Carriers [0 -10]
Others [10 – 20]
Source: Determined by the Commission, utilising annual turnover figures obtained
from the relevant market players.
[2] Table 1 above reveals that the merged entity will post-merger have a
market share of approximately [10 – 20]% in a national market for the
provision of outsourced, road based secondary distribution of
petrochemicals, with a market accretion of less than 1%.
[3] As stated in paragraph above, the nature of the market is that of a
bidding market and post-merger there will be a number of competitors
to the merged entity, including two large players, namely Unitrans and
Tanker Services.
[4] Furthermore, this is a pro-competitive merger in the sense that it
neutralises competitive issues within Imperial given its premerger
investment in commercially competing firms (see paragraphs and
above).
[5] The proposed deal raises no public interest concerns. The merging
parties confirmed that the proposed deal will have no effect on
employment.
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CONCLUSION
[6] In light of the above, we find that the transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
Furthermore, there are no significant public interest issues that arise
from the proposed deal. We accordingly approve the transaction.
____________________ 04 May 2010
Andreas Wessels DATE
Norman Manoim and Yasmin Carrim concurring.
Tribunal Researcher: Thandi Lamprecht
For the merging parties: Garlicke & Bousfield Inc
For the Commission: Nazeera Ramroop (Mergers & Acquisitions
Division)
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