COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:26/LM/Apr11
In the matter between:
Hosken Consolidated Investments Limited Acquiring Firm
And
KWV Holdings Limited Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 04 May 2011
Order issued on : 05 May 2011
Reasons issued on : 06 May 2011
Reasons for Decision
Approval
1] On 4 May 2011 the Competition Tribunal (“Tribunal”) approved the large merger
between Hosken Consolidated Investments Limited (“HCI”) and KWV Holdings
Limited (“KWV”). The Tribunal’s reasons for approving the transaction are set out
below.
The Parties to the transaction
2] The primary acquiring firm is Hosken Consolidated Investments Limited, 1 a public
investment company listed on the Johannesburg Stock Exchange. HCI’s major
shareholder is the South African Clothing and Textile Workers Union
(“SACTWU”) with 37.9% of the issued share capital in HCI.
1 http://www.hci.co.za/
1
3] The target firm, KWV Holdings Limited, 2 is a JSE listed public investment
company which owns and operates one of the leading wine and spirits producers
in South Africa. HCI currently owns 34.95% of the issued share capital in KWV.
4] HCI has been involved in a number of transactions increasing its stake in KWV
with the goal of attaining sole control of KWV. This proposed transaction is a
further step by HCI towards their goal.
The activities of the parties
5] The Acquiring Firm:
HCI has investments in a diversified range of business areas and industries such
as Media & Broadcasting, Casinos, Hotel & Leisure, Clothing & Textiles,
Transport, Energy, Property and Technology:
Gaming Hotels and Leisure
TSOGO INVESTMENT HOLDING
COMPANY
74.7%
VUKANI GAMING CORPORATION
100%
Media and Broadcasting
MIDI TV (e.TV)
63%
YIRED
63%
E SAT.TV
63%
THREE BLIND
MICE
COMMUNICATION
S
71.3%
Transport
GOLDEN ARROW BUS
SERVICE
100%
Energy
MONTAUK ENERGY
CAPITAL
91.5%
HCI KHUSELA COAL
80%
2 http://www.kwv.co.za/
Property and Exhibitions
GALLAGHER
100%
Industrial
FORMEX
90%
Services and Technology
Business Systems
Group (Africa)
40%
Syntell
55%
Isilumko
30.1%
Limtech
58.9%
Clothing and Textiles
Seardel Limited
70%
The above Graphic Table is from the HCI website.3
6] The Target Firm:
a. KWV is essentially a vertically integrated wine and spirits business, owns
a wine farm, and procures grapes and wine for the production of wine and
spirits. KWV owns one of the largest premium brands of wine in the
country and also has a non controlling interest in the Paarl Bottling
Company.
b. KWV controls the following subsidiaries:
• KWV South Africa (Pty) Ltd;
• KWV International (Pty) Ltd;
• KWV Intellectual Property (Pty) Ltd;
• KWV Projects (Pty) Ltd;
• Kaapse Wynprodusente Vereniging (Pty) Ltd;
• Wijngaarg Beleggings (Pty) Ltd;
• Edward Cavendish and Sons (Pty) Ltd;
• KWV International Holdings Gmbh;
• KWV International (Europe) Ltd; and
• Golden Kaan South Africa (Pty) Ltd.
7] There is no overlap between the activities of the merging parties nor are there
any firms in the broader acquiring firm in a vertical relationship with the target
3 http://www.hci.co.za/corp_profile.htm
3
firm.
The Rationale
8] Through the present transaction, HCI intends acquiring 0.05% of the issued
share capital of KWV as a further step in its goal of attaining sole control of KWV.
9] The result of the acquisition of the 0.05% will result in HCI owning 35% of the
issued share capital of KWV and thereby become obliged, in terms of the
Securities Regulation Panel (“SRP”) Code to extend a mandatory offer to the
other shareholders of KWV.
10] Depending on the extent of the acceptance of the mandatory offer by the other
shareholders, HCI could be placed in a position to acquire the entire issued share
capital of KWV.
11] HCI further states that by acquiring sole control of KWV, it would be in the
position to employ its skilled management team in turning around KWV’s
underperforming business. This goal seems to correlate with HCI’s role as an
investment company.
The relevant market and the impact on competition
12] The parties and Commission agree that the relevant market is the market for the
production and sale of bottled wine, bottled spirits, bulk spirits, contract for
bottling and carbonated grape juice.
13] There is no overlap in the activities of the parties and the Commission is of the
opinion that that this merger is unlikely to substantially prevent or lessen
competition in the relevant market.
Public Interest
14] The merging parties have notified the Food and Allied Workers Union (“FAWU”)
in their capacity as the employees’ representative and no employment issues
were raised.
Conclusion
15] We agree with the Commmission that as there is no overlap between the
activities of the merging parties nor vertical integration, the merger does not
raise any competition concerns Furthermore no public interest grounds have
been raised that would not justify approval of the merger.
16] Accordingly, the above merger is approved without conditions.
____________________ 06 May 2011
____________________ 06 May 2011
N Manoim DATE
Y Carrim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Mark Garden and Ruthendo Hlatshwayo of
Edward Nathan Sonnenbergs,
For the Commission: Lameez Vania, Mfundo Ngobese, Marten van
Hoven
5