COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 46/LM/JUN11
In the matter between:
ENGINE HOLDING GmbH Acquiring Firm
And
TOGNUM AG Target Firm
THE BERGEN BUSINESS Target Firm
CURRENTLY OPERTAED BY ROLLS-ROYCE
Panel : Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 06 July 2011
Order issued on : 06 July 2011
Reasons issued on : 21 July 2011
Reasons for Decision
Approval
1] On 06 July 2011, the Competition Tribunal (“Tribunal”) approved the
transaction involving Engine Holding GmbH, Tognum AG and the Bergen
Business currently operated by Rolls-Royce. We explain below our
reasons for this conclusion.
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Parties to the transaction
2] The primary acquiring firm is Engine Holding GmbH (“Newco”), a special
purpose vehicle established exclusively for purposes of the current
transaction. It is jointly controlled by Daimler AG (“Daimler”) and Rolls-
Royce Group plc (“Rolls-Royce”).
3] Daimler is a public company listed on the Frankfurt and Stuttgart Stock
Exchanges and is not controlled by any firm. Daimler has a number of
subsidiaries in South Africa. Through one of its wholly owned subsidiaries,
Daimler Vermögens – und Beteiligungsgesellschaft mbH (“DVB”), Daimler
currently holds a 28.4% non-controlling stake in Tognum AG (one of the
target firms, see below).
4] Rolls-Royce is a public company listed on the London Stock Exchange
and is not controlled by any firm. Rolls-Royce has numerous subsidiaries
world-wide.
5] The primary target firms are (i) Tognum AG (“Tognum”), a public company
incorporated under the laws of the Federal Republic of Germany; and (ii)
the Bergen Business currently operated by Rolls-Royce (“Bergen”), a
public company listed on the London Stock Exchange. Tognum has a
number of subsidiaries world-wide. Bergen is wholly owned by Rolls-
Royce. It does not itself control any firms. Tognum and Bergen collectively
are referred to below as the “target firms”.
Proposed transaction and rationale
6] According to the merging parties’ submissions, the proposed transaction
involves two interdependent steps in terms of which Newco intends to
acquire at least 50% plus one share in Tognum, thereby acquiring sole
control in Tognum and 100% of the entire issued share capital of Bergen.
Pursuant to the proposed transaction, Newco therefore will have sole
control over both Tognum and Bergen.
7] The merging parties submitted that due to the complementary nature of
their global activities, the proposed transaction will create both synergies
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and efficiencies.
Merging parties’ activities
Acquiring firms
8] As a special purpose vehicle established exclusively for purposes of the
proposed transaction, Newco does not currently engage in any business
activities.
9] Daimler is an automotive company that specialises in the manufacturing
and selling of premium cars and commercial vehicles world-wide. Daimler
through its subsidiary Mitsubishi Fuso Truck and Bus Corporation (“Fuso”)
sells diesel engines for off-highway use, mainly in Asia. These engines
are not sold in South Africa.
10] Rolls-Royce manufactures and develops inter alia civil aircraft engines,
power systems for military aerospace, marine and energy applications.
Target firms
11] Tognum specialises in the development, manufacturing and selling of
high-speed diesel reciprocating engines for off-highway applications (such
as power generation and industrial and marine applications). It is also
active in the area of gas reciprocating engines, generator sets and fuel
injection systems. Tognum’s main business in South Africa, through MTU
South Africa (Pty) Ltd (“MTU South Africa”), relates to diesel engines.
MTU South Africa offers a wide range of diesel engines from 20 to
9000kW.
12] Bergen produces and sells medium-speed gas and diesel reciprocating
engines for power generation and marine applications. Bergen’s activities
in South Africa however are limited to propulsion and marine equipment
(mainly deck machinery).
Competition assessment
13] The activities of the merging parties do not overlap in South Africa. In
particular, the activities of Bergen, relating to propulsion and marine
equipment, are extremely limited in South Africa. Tognum’s activities in South
Africa relate to diesel products namely: engines, gensets and fuel injection
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systems.
14] Globally however there is an overlap in the merging parties’ activities in
respect of the manufacture and supply of:
i) diesel reciprocating engines for off-highway applications
(“diesel engines”);
ii) gas reciprocating engines for off-highway applications (“gas
engines”); and
iii) diesel and gas generator sets (“gensets”).
15] Since there is no overlap of the merging parties activities in South Africa the
Commission analysed each of the above-mentioned areas of overlap
separately as potential product markets in an international geographic market
context. It identified the following market shares for various market
participants:
Table 1 International market shares in potential markets for the
manufacture and supply of diesel engines (as defined above),
gas engines (as defined above), diesel gensets and gas gensets
Participant Diesel
engines
(%)
Gas engines
(%)
Diesel
gensets
(%)
Gas
gensets
(%)
Caterpillar [20-30] [30-40] [20-30] [20-30]
Wartsila [0-10] [20-30] [10-20] [20
-
30]
GE [0-10] [20-30] [0-10] [20
-
30]
MWM - [10-20] [0-10] [10
-
20]
MAN [0-10] - [0-10] [0-
10]
Cummins [10-20] [0-10] [20-30] [0-
10]
Tognum [0-10] [0-10] [0-10] [0-
10]
Bergen [0-10] [0-10] [0-10] [0-
10]
16] The estimated international post merger market shares of the merged entity
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are below 15% in all of the above-mentioned potential product markets. In all
of these markets there are a number of competitors, as is evident from the
above Table 1.
17] The Commission also found that there are certain vertical supply relationships
between the merging parties internationally, but concluded that this raises no
foreclosure concerns in South Africa. We therefore do not deal with these
vertical relationships any further in these reasons.
18] Based on the above we conclude that the proposed transaction is unlikely to
lead to a substantial prevention or lessening of competition in any relevant
market.
Public interest
19]The merging parties submitted that the proposed transaction will not have any
negative effect on employment in South Africa. 1 Furthermore, the proposed
transaction does not raise any other public interest issues.
CONCLUSION
20] We find that the proposed transaction is unlikely to lead to any substantial
prevention or lessening of competition in any relevant market. The proposed
deal also raises no public interest concerns. Accordingly, we approve the
proposed transaction unconditionally.
____________________ 21 July 2011
Andreas Wessels DATE
Norman Manoim and Yasmin Carrim concurring
Tribunal researcher: Tebogo Hlafane
For the merging parties: Edward Nathan Sonnenbergs Inc. and Webber Wentzel
For the Commission: Zanele Hadebe
1 See inter alia page 16 of the record.
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