COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:50/LM/Jul11
In the matter between:
Murray and Roberts Steel (Pty) Ltd Acquiring Firm
And
Alert Steel Polokwane (Pty) Ltd
Target Firms
Alert Steel Reinforcing (Pty) Ltd
Panel : Yasmin Carrim (Presiding Member);
Andreas Wessels (Tribunal Member); and
Andiswa Ndoni (Tribunal Member)
Heard on : 17 August 2011
Order issued on : 17 August 2011
Reasons issued on : 10 November 2011
Reasons for Decision
Approval
[1] On 17 August 2011 the Competition Tribunal (the “Tribunal”) unconditionally
approved the acquisition by Murray and Roberts Steel (Pty) Ltd of Alert Steel
Polokwane (Pty) Ltd and Alert Steel Reinforcing (Pty) Ltd. The reasons for
approval follow below.
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Parties to the transaction
[2] The primary acquiring firm is Murray and Roberts (Pty) Ltd (“M&R Steel”), a
wholly owned subsidiary of Murray and Roberts Ltd (“M&R Ltd”). M&R Steel
controls in excess of 15 firms including Reinforcing Steel Contractors (Pty)
Ltd (“RSC”) and BRC Mesh Reinforcing (Pty) Ltd (“BRC Mesh”).1
[3] The primary target firms are Alert Steel Polokwane (Pty) Ltd (“Alert
Polokwane”) and Alert Steel Reinforcing (Pty) Ltd (“Alert Reinforcing”). Alert
Reinforcing and Alert Polokwane are both jointly controlled by M&R Steel and
Alert Steel Holdings Ltd.
Description of the transaction
[4] In terms of the structure of the transaction, Alert Steel Holdings will terminate
its 50% shareholding in Alert Reinforcing and Alert Polokwane. Thus the joint
control over the target firms by M&R Steel and Alert Steel Holdings will be
terminated and M&R Steel will effectively acquire sole control over the target
firms.
Activities of the parties
[5] M&R Steel is a holding company which operates through a number of
subsidiaries and agency companies. Through these subsidiaries and agency
companies M&R Steel is involved in construction related activities in the
construction sector. For purposes of this transaction, the relevant activities of
M&R Steel are those related to rebar 2 and steel mesh. 3 Through RSC, M&R
Steel is involved in the supply, cutting and bending of rebar (reinforcing bar).
Through BRC M&R Steel manufactures and supplies mesh reinforcing.
[6] Alert Reinforcing is a rebar yard situated in Pretoria and Alert Polokwane
comprises six steel retail outlets and one rebar yard situated in Polokwane.
According to the Commission, the six retail outlets formed part of the
1For a list of M&R Steel’s subsidiaries, refer to the form CC4(1) filed in respect of M&R Steel.
2Rebar is described as a common steel bar which is utilised to reinforce concrete structures
such as walls, slabs, columns and decks of buildings.
such as walls, slabs, columns and decks of buildings.
3 The merging parties define mesh as a welded, deformed and interlaid wire with diameters
ranging from 5.5 to 14mm, the base product of which is steel rods “drawn down” to drawn
(indented) wire.
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acquisition by Capital Africa Steel of Alert Steel Holdings Ltd 4 in an
intermediate merger that was approved in May 2011. The outlets therefore do
not form part of the instant transaction.
Rationale for the transaction
[7] The merging parties submitted that Alert Steel Holdings, which manages the
rebar facilities, has, in recent years, suffered enormous financial losses. They
further submitted that M&R Steel can, through its extensive expertise in the
rebar market, return the rebar yards to profitability. In addition, the merging
parties submitted that since Alert Steel Holdings has experience in the sale of
steel to merchants and also has a regional footprint, it will focus its business
on this aspect.
Competition analysis
[8] The Commission identified an overlap in the activities of the merging parties
in respect of the rebar yard operations (cutting, bending and installation) as
well as the supply of mesh. The Commission defined the geographic markets
for rebar and mesh as being regional, i.e. Gauteng and Limpopo
(Polokwane).
(i) Market shares
[9] In respect of the market shares the Commission found that the merging
parties’ combined post-merger market share in the rebar market is
approximately 27% and 18% in Gauteng and Limpopo respectively. With
respect to the mesh market the Commission found that the merging parties
would have a combined post-merger market share of approximately 21% and
26% in Gauteng and Limpopo respectively. In both these markets the
merging parties compete with firms such as Steeledale, Vulcania, Silverton
Reinforcing, Macsteel, NJR, Barnes Reinforcing and RMS. Customers 5
contacted during the investigation of this transaction did not raise any
concerns regarding the transaction. These customers also indicated to the
Commission that they source products from suppliers with the lowest price.
4 Commission case no: 2010Apr0010.
4 Commission case no: 2010Apr0010.
5These customers include Tubular Track (Pty) Ltd, Ya Rena Civils (Pty) Ltd, EH Hassim
Hardware (Pty) Ltd and Lonerock Construction (Pty) Ltd.
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The Commission also found that the target firms are relatively small players in
both the rebar and mesh markets.6
(ii) Cartel Investigations
[10] A cartel complaint was referred by the Commission to the Tribunal in both the
rebar and mesh markets on 02 December 2009 and 09 February 2011
respectively. The Commission submits that M&R, who was the leniency
applicant as per the Commission’s Leniency Policy, was granted immunity.
The Commission subsequently entered into a settlement agreement with one
of the respondents, i.e. the Aveng Group, for its involvement in both the mesh
and rebar cartels and the Tribunal granted consent to this settlement on 06
April 2011. Alert Steel was not a respondent in either the rebar or the mesh
cartel.
[11] Even though Alert Steel was not part the cartel investigations, the Tribunal
suggested to the merging parties that Alert Steel should consider going
through a competition compliance programme, particularly given the fact that
people become acquainted with what happens in an industry and industry
practices and the same people tended to move between jobs and companies.
The merging parties undertook to implement such a programme.
(iii) Management of Alert Reinforcing
[12] The Commission states that it raised concerns during its assessment of the
Capital Africa Steel/Alert Steel merger regarding the interim period which
provided an avenue for Capital Africa Steel and M&R Steel (competitors in
the rebar market) to engage with respect to the operation of Alert Reinforcing.
In this respect, the parties to that transaction submitted to the Commission
that Alert Reinforcing was (at that time) being managed by a manager of M&R
who reports directly to the CEO of M&R Steel and that during the interim
period M&R would continue to manage Alert Reinforcing. The parties
undertook that in the event of a board meeting taking place, Capital Steel
would ensure that none its personnel attend the meeting.
would ensure that none its personnel attend the meeting.
6 This is based on the volume of sales.
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[13] Based on the above and in light of the undertakings given by the merging
parties, we agree with the Commission that the proposed transaction is
unlikely to result in a substantial lessening or prevention of competition in the
rebar and mesh reinforcing markets.
Public interest
[14] The parties submitted to the Commission that there are no significant public
interest concerns arising from this transaction.
CONCLUSION
[15] We conclude that the proposed transaction will not result in a substantial
lessening of competition in the affected markets as there are alternative
players who compete with the merging parties. There are no significant public
interest issues and we accordingly approve the transaction.
________________ 10 November 2011
Yasmin Carrim Date
Andreas Wessels and Andiswa Ndoni concurring.
Tribunal Researcher: Ipeleng Selaledi
For the Acquiring Firm: Bowman Gilfillan
For the Target Firms: Cliffe Dekker Hofmeyr
For the Commission: Lucinda Grace Mohamed
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