COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:67/LM/Oct10
In the matter between:
AECI Limited Acquiring Firm
And
Qwemico Distributors (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Andreas Wessels (Tribunal Member)
and Medi Mokuena (Tribunal Member)
Heard on : 08 February 2011
Order issued on : 08 February 2011
Reasons issued on : 10 February 2011
Reasons for Decision
Approval
1] On 8 February 2011 the Competition Tribunal (“Tribunal”) conditionally
approved the acquisition by AECI Limited of Qwemico Distributors (Pty)
Ltd. The reasons for approval follow below
The Transaction
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2] The primary acquiring firm is Plaaskem a division of AECI Limited
(“Plaaskem”). AECI is a public company listed on the JSE. Related to
the current transaction are the operations of Plaaskem and UAP a
division thereof.
3] The primary target firm is Qwemico Distributors (Pty) Ltd, (“Qwemico”).
Qwemico is jointly owned by; Theunis Gert Coetzee, Herbert Gustav
Lammerding, August Wilhelm Gustav Le Roux, Phillipus Carel Luus
and Pieter Willem Adriaan Nel.
4] Plaaskem proposes to acquire the business of Qwemico. On
completion of the proposed transaction Plaaskem will control the
business of Qwemico.
The Rationale
5] From the acquiring firms perspective, it is anticipated that the
integration of Qwemico’s existing distribution infrastructure into
Plaaskem, will result in cost and operating efficiencies and will provide
Plaaskem with a efficient and effective route to market for its basket of
agrochemicals.
6] From the primary target firms perspective, the sellers are all above the
age of sixty-two and the transaction offers an opportunity for them to
realize their investment and to ensure growth and continuity in the
organization they have built up.
The parties and their activities
7] Plaaskem is a specialty chemical business involved in the
agrochemical industry and services both the local and export market
with a range of products. It is active is various levels of the value chain
particularly in the manufacture, import and distribution of
agrochemicals. Qwemico is a distributor of agrochemicals, it sell
agrochemicals directly to farmers.
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The relevant market and the impact on competition
8] The market can be defined as the market for the manufacture and
supply (upstream) and distribution (downstream) market for
agrochemicals1. The geographic market is national.
9] The transaction presents both horizontal and vertical overlaps.
Horizontally, the activities of Plaaskem and its subsidiary UAP, overlap
with those of Qwemico with respect to the distribution of
agrochemicals. Vertically, Plaaskem is an upstream supplier of
agrochemicals and thus supplies firms like Qwemico that are active in
the downstream market for the distribution of agrochemicals.
10]The upstream market for the manufacture of agrochemicals can be
defined in various ways and it is not necessary for us to come to any
definite conclusions on this for the purpose of this decision. From the
Commission’s report it is evident that even on the narrowest
constructions of the upstream market Plaaskem would not be
considered to have dominant position. In the downstream market the
overlaps do not appear significant and it appears that Qwemico offers
Plaaskem a presence in the northern part of the country where its
distribution footprint is thin.
11]In both markets there are a number of strong and viable competitors
and the parties’ post merger market share accretion remains low. We
find that it is unlikely that there will be any customer or supplier
foreclosure.
12]A firm that had its products distributed by UAP, Plaaskems subsidiary
which it acquired in 20052 complained to the Commission that post that
merger, UAP now controlled by Plaaskem, had refused to distribute its
products and it was concerned that the same would happen in respect
of Qwemico. Unfortunately we were not able to put the name of this
1 Agrochemicals is the generic term used for various chemical products used in
agriculture.
2 Plaaskem (Pty) Ltd and UAP Agrochemicals KZN (Pty) Ltd,UAP Crop Care (Pty) Ltd
agriculture.
2 Plaaskem (Pty) Ltd and UAP Agrochemicals KZN (Pty) Ltd,UAP Crop Care (Pty) Ltd
Case No. 78/LM/Oct04.
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firm to the merging parties for a response as we were advised the firm
had wanted its identity kept confidential. At the hearing the Mr Cross
for Plaaskem said he was not aware of any firm having been refused
distribution by UAP. We cannot take this aspect further but it does
seem that even if the merged firm were to foreclose manufacturer
competitors of Plaaskem from its distribution system alternatives for
supply exist the market 3. In light of the above, we find that the
transaction would not substantially prevent or lessen competition the
relevant markets.
Public Interest
13]Public interest concerns were raised by this merger as the merger will
have an impact on employment. The merging parties initially submitted
a worst case scenario of fourteen retrenchments. This has been
reduced to no more than nine and conditional upon the provision of
providing training for the affected employees. In discussions with the
Commission the merging parties agreed on the terms of an undertaking
around retrenchments and further agreed that this undertaking could
be made a condition of the approval of the merger. The undertaking
sets a ceiling on the number of employees to be retrenched and
provides for a training subsidy for those to be retrenched.
CONCLUSION
14]Given the undertaking it is not necessary to consider whether the
transaction would have had an adverse effect on employment. To the
extent it might, the undertaking adequately remedies it. We accordingly
approve the transaction conditional upon the conditions contained in
annexure “A” being met.
____________________ 10 February 2011
3 Effective competitors in the distribution market who distribute agrichemicals in the
north of South Africa include VentChem, Laeveld AgroChem, Avelo and the Novon
Group
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Norman Manoim DATE
Andreas Wessels and Medi Mokuena concurring.
Tribunal Researcher: Thandi Lamprecht
For the merging parties: Webber Wentzel Attorneys
For the Commission: Grace Mohamed
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