COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 25/LM/May10
In the matter between:
MB Technologies Investments (Pty) Ltd Acquiring Firm
And
Ingram Micro (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member)
Andreas Wessels (Tribunal Member)
Mbuyiseli Madlanga (Tribunal Member)
Heard on : 14/07/2010
Order issued on : 14/07/2010
Reasons issued on : 19/10/2010
Reasons for Decision
Approval
1] On 14 July 2010 the Competition Tribunal (“Tribunal”) unconditionally
approved the merger between MB Technologies Investments (Pty) Ltd (“MBT
Investments”) and Ingram Micro (Pty) Ltd (“Ingram Micro”). The reasons
follow below.
The Transaction
2] The primary acquiring firm is MBT Investments which is controlled by MB
Technologies (Pty) Ltd; South Africa’s leading black-owned IT distribution
group, which holds 97.1% shareholding in MBT Investments. MBT
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Investments has in excess of ten subsidiaries, of relevance to this transaction
are; Tarsus Technologies (Pty) Ltd (“Tarsus”), through which MBT
Investments is active in the wholesale distribution of computer hardware
throughout South Africa, and Ingram Micro which is also active in the
wholesale distribution of computer hardware in South Africa. The ultimate
controlling shareholder of the acquiring group is Royal Bafokeng Holdings
(Pty) Ltd (“Royal Bafokeng”) which holds 55% of MB Technologies.
3] The primary target is Ingram Micro which does not control any firm, and is
50% held by Ingram Micro BV and 50% by MBT Investments.
4] Essentially, the merging parties are both subsidiaries of the same holding
company being, Royal Bafokeng, and together they operate a South African
joint venture which deals in the wholesale and distribution of computer
equipment; including desktop, laptop and network equipment.
5] This merger is essentially a move from joint to sole control, in which MBT
Investment will acquire the remaining 50% share in Ingram Micro BV, and
ultimately have sole control over Ingram Micro.
Rationale
6] Ingram Micro BV has not been actively involved in the day to day
management of Ingram Micro and has thus decided to exit the joint venture
by selling its 50% stake to MBT Investments. For MBT Investments the
transaction is an opportunity to realise its investment and grow its niche
offering in the market for distribution of computer components.
Competition Analysis
Horizontal Analysis
7] The Commission found that there is horizontal overlap in three markets; i.e.
the national market for the wholesale distribution of desktop equipment; the
national market for the wholesale distribution of laptop equipment; and the
national market for the wholesale distribution of network equipment, in which
both merging parties are active.
8] The Commission acknowledged that the boundaries between desktop and
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laptop markets are not clear. However customers indicated that as one
moves from entry level products to higher end products, the distinction
between desktops and laptops becomes more pronounced.
9] In all these separate identified markets, the market share accretion post
merger is too negligible to raise any competition concerns, as it is
approximately 1%.1 In addition there are numerous other competitors
remaining in these markets.
10] The Commission also found that the IT distribution level in the value chain is
highly competitive given the wide range of alternatives for customers, which
gives them countervailing power.
Barriers to Entry
11] The Commission in its investigation interviewed various customers and
competitors of the merging parties. Most did not raise any concerns about the
merger, except one of the competitors; a company called Axiz which raised
the issue of access to vendor agencies as a high barrier to entry in the
industry. The Commission however found that access to vendor agencies is
a structural barrier which has been raised through the natural market process,
and not as a result of the merger.
CONCLUSION
[12] Based on the aforementioned competition analysis, the Tribunal concludes
that the proposed merger is unlikely to lead to a substantial prevention or lessening
of competition in any of the relevant markets. There are no public interest concerns
arising from the proposed deal. Hence the proposed transaction is approved
unconditionally.
____________________ 19/10/2010
Norman Manoim DATE
Andreas Wessels and Mbuyiseli Madlanga concurring
1 According to the view of the merging parties, in the market for wholesale distribution of desktop
equipment Tartus has 12% market share and Ingram Micro has 0.05% market share prior to the merger;
in the market for wholesale distribution of laptop equipment, Tartus has 27%, and Ingram Micro has
0.05% market share prior to the merger; and in the market for wholesale distribution of networking
equipment Tartus has 11% market share prior to the merger, and Ingram Micro has 1.10% market
share.
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Tribunal Researcher : Londiwe Senona
For the merging parties : Mr Glen Fullerton from MB Technologies and Mr
Hansie Fourie from Ingram Micro
For the Commission : A Constantinou
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