COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 11/LM/Feb11
In the matter between:
RMB Ventures Six (Pty) Ltd Acquiring Firm
And
MCG Industries (Pty) Ltd Target Firm
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Andiswa Ndoni (Tribunal Member)
Heard on : 19 May 2011
Order issued on : 19 May 2011
Reasons issued on : 08 June 2011
Reasons for Decision
Approval
1] On 19 May 2011 the Competition Tribunal (“Tribunal”) approved the proposed
transaction involving RMB Ventures Six (Pty) Ltd and MCG Industries (Pty) Ltd.
The Tribunal’s reasons for approving the transaction are set out below.
Parties to the transaction
2] The primary acquiring firm is RMB Ventures Six (Pty) Ltd (“RMBV6”), a company
incorporated in terms of the laws of the Republic of South Africa. RMBV6 is
controlled by RMB Investment and Advisory (Pty) Ltd (“RMB Investment”) which
in turn is controlled by FirstRand Investment Holdings (Pty) Ltd (“FirstRand
Investment”).1 FirstRand Investment is controlled by FirstRand Ltd, a JSE listed
entity which is not controlled by any single shareholder. 2 For the purposes of this
1 http://www.firstrand.co.za/live/index.php
2 FirstRand Ltd’s shareholders include RMB Holdings Ltd (30.06%); Financial Securities Ltd (8.53%); Public
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transaction, the above firms will collectively be referred to as the acquiring group.
3] The target firm is MCG Industries (Pty) Ltd (“MCG”), a company incorporated
under the laws of the Republic of South Africa. MCG is not controlled by any firm.
MCG controls MCG Plastic Closures (Pty) Ltd.3
4] The acquiring group premerger already owns 48.62% of the shares in MCG
through different subsidiaries. The acquiring group through the proposed deal
intends to acquire 34.44% of the issued share capital of MCG. Pursuant to the
proposed transaction the FirstRand group will beneficially own 82.48% of the
shares in MCG and therefore have sole control of MCG.4
Rationale for the proposed transaction
5] According to the acquiring firm the proposed transaction will enable it to invest in
a business that is well known to it 5 at a reasonable valuation, providing attractive
financial returns. The proposed transaction will also simplify future decision
making in MCG at shareholder level.
6] The target firm views the proposed transaction as a means for its shareholders to
either partly or fully realise the value of their investment. Some shareholders will
realise portions of their investment whilst still retaining a stake in the business.
Activities of the merging parties
7] FirstRand is an integrated financial services group providing inter alia retail,
investment, corporate and private banking services, various insurance products
and asset management services. RMBV6 is an investment holding company
established to hold shares and thereby acquire investments in unlisted entities.
RMB Investment is also an investment holding company.
8] Of relevance to this transaction is that Corvest 6 (Pty) Ltd, which is part of the
FirstRand group, holds 66% of the shares in SA Leisure (Pty) Ltd (“SA Leisure”)
which is involved in the manufacture, sale and distribution of a wide range of
plastic consumer products such as outdoor furniture, home and office furniture,
plastic consumer products such as outdoor furniture, home and office furniture,
camping equipment, gardening equipment and storage and DIY goods.
9] The primary target group operates through three business divisions being the (i)
plastic closures, (ii) metal closures and (iii) injection moulding divisions. Of
relevance to this transaction is the injection moulding division which
manufactures injection moulded products for a wide range of industries including
the beverage, furniture, materials handling, bakery and agricultural industries. It
also produces plastic moulded chairs and seats sold to suppliers that sell these
chairs to inter alia schools, hospitals and canteens.6
Competitive assessment
Investment Corporation (11.77%); and FirstRand Empowerment Trust and related parties (8.7%).
3 http://www.mcgindustries.com/index.html
4 RMB Ventures Two (Pty) Ltd will sell 0.58% of its shares in MCG to a new shareholder.
5 As stated above, the acquiring group already owns 48.62% of the shares in MCG.
6 http://www.mcgindustries.com/injecMoulding.html
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10] The Competition Commission (“Commission”) concluded that from a supply-side
perspective there is a product overlap between the activities of SA Leisure, which
forms part of the acquiring group, and the injection moulding division of MCG
since both firms are involved in the manufacture and sale of plastic chairs. The
merging parties however indicated that they cannot be regarded as competitors
in the manufacture and sale of plastic chairs since they operate at different levels
of the supply chain and therefore have different distribution channels and
different customers. SA Leisure produces and sells plastic chairs to retailers that
are marketed as outdoor furniture for use by end-users. MCG manufactures and
sells heavy duty, industrial type plastic chairs to supplies and distributors for use
in for example canteens, restaurants, hospitals, schools, offices and auditoriums.
The Commission’s market investigation showed that from a demand or customer
perspective, the plastic chairs produced by the merging parties are not
substitutable in terms of price, functionality and quality. Furthermore, at the
hearing Mr Naidoo of the merging parties indicated that the price difference
between the heavy duty chairs of MCG and the light weight chairs sold in retail
stores is approximately 40%.
11] There is however no need for the Tribunal in this case to take a definitive view on
the exact parameters of the relevant product market since the proposed deal
raises no likely competition concerns even in an assumed broad market for the
production and sale of plastic chairs in South Africa. Customers contacted by the
Commission during the course of its investigation did not raise any concerns
about the proposed merger and furthermore identified several players that are
active in this market including Rand Plastics, Goldsun, Chemcraft, Unica and
Glofurn. We therefore conclude that the proposed merger is unlikely to
Glofurn. We therefore conclude that the proposed merger is unlikely to
substantially prevent or lessen competition in a potential national market for the
production and sale of plastic chairs.
Public interest
12]The merging parties confirmed that no job losses or retrenchments are
anticipated as a result of the proposed transaction 7 and no other public interest
issues arise from this transaction.
Conclusion
13] Given that no likely competition or public interest issues arise from the proposed
merger the Tribunal approves the transaction without conditions.
____________________ 08 June 2011
A Wessels DATE
A Ndoni and M Mokuena concurring
Tribunal Researcher: Songezo Ralarala
For the merging parties: Pia Harvey of Cliffe Dekker Hofmeyr
For the Commission: Mogalane Matsimela and Seema Nunkoo
7 See inter alia page 8 of the record.
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