COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 82/LM/SEP11
In the matter between:
LODESTONE BRANDS (PTY) LTD Acquiring Firm
And
MISTER SWEET (PTY) LTD Target Firm
Panel : Andreas Wessels (Presiding Member)
Andiswa Ndoni (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 16 November 2011
Order issued on : 16 November 2011
Reasons issued on : 22 December 2011
Reasons for Decision
Approval
1] On 16 November 2011 the Competition Tribunal (“Tribunal”) approved the large
merger between Lodestone Brands (Pty) Ltd and Mister Sweet (Pty) Ltd. We set
out below our reasons for this decision.
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Parties to the transaction
2] The primary acquiring firm is Lodestone Brands (Pty) Ltd (“Lodestone”), a firm
incorporated in accordance with the laws of the Republic of South Africa.
Lodestone is controlled as to 60% of its issued share capital by Standard
Chartered Private Equity (Mauritius) III Ltd, a wholly owned subsidiary of
Standard Chartered Bank PLC. Lodestone controls two firms, namely Candy
Tops (Pty) Ltd (“Candy Tops”) and Cyndara 224 (Pty) Ltd.
3] The primary target firm is Mister Sweet (Pty) Ltd (“Mister Sweet”). Mister Sweet
controls R-e Four Nought Two (Pty) Ltd.
Proposed transaction
4] In terms of the Sale of Shares Agreement, Lodestone is acquiring all of the Sale
Assets (as defined in the Agreement) of Mister Sweet. In essence the proposed
transaction contemplates the acquisition by Lodestone of 60% of the ordinary
shares in the issued share capital of Mister Sweet, thereby giving Lodestone sole
control over Mister Sweet.
Rationale for the transaction
5] The merging parties submitted that, through the proposed transaction, Lodestone
wishes to establish and grow a diverse portfolio of businesses within the Fast
Moving Consumer Goods sector in South Africa, Sub-Saharan Africa and South
East Asia. As Mister Sweet’s product portfolio is complimentary to the Candy
Tops portfolio in terms of its focus on higher-end, sugar-based confectionary, the
increased sales in sugar-based confectionary will provide significant opportunities
for synergies such as a shared sales team and merchandising service between
Candy Tops and Mister Sweet. This and other factors, the merging parties
submitted, will allow Lodestone to be more competitive in the sugar-based
confectionary market.
6] From a Mister Sweet perspective, Lodestone will assist Mister Sweet with the
next strategic phase of the business.
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Merging parties’ activities
7] Lodestone’s current commercial and business activities are limited to the
activities of its subsidiary Candy Tops. Candy Tops manufactures, markets and
distributes a wide range of confectionary products such as bubblegum, boiled
sweets, éclairs, toffees, chews, caramels, panned confectionary and lollipops. It
sells and markets its confectionary under its “ Candy Tops” and “Sovereign”
brands.
8] Mister Sweet manufactures, markets and distributes a wide range of
confectionary products including wine gums, soft eating gums, sour gums,
liquorice allsorts, and marshmallows. It sells and markets these products under
its “Mister Sweet” brand, as well as under a certain “house brand”.
Relevant market(s) and impact on competition
9] The confectionary products of the merging parties overlap with respect to the
supply of sugar-based confectionary products. 1 In relation to sugar-based
confectionary products the overlap is further confined to (i) panned confectionary;
and (ii) toffees, chews and caramels.
10] There is no need for us in this case to take a definitive view on the exact
parameters of the relevant product market(s). We have assessed the competition
effects of the proposed transaction in the broader product market for the
production and sale of sugar-based confectionary, as well as in the narrower
product markets for (i) panned confectionary; and (ii) toffees, chews and
caramels.
11] The post-merger national market shares of the merged entity will be less than
20% in all of the above-mentioned potential product markets. Competitors in the
sugar-based confectionary market include players such as Tiger Brands
(Beacon) and Cadbury Craft.
Public interest
12]The merging parties submitted that the proposed transaction will not result in any
employment losses in South Africa.2
1 There is no overlap in regard to bars, chewing and bubblegum and chocolate confectionary.
1 There is no overlap in regard to bars, chewing and bubblegum and chocolate confectionary.
2 Record pages 12 and 70.
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13] The proposed transaction does not raise any other public interest issues.
CONCLUSION
14] We conclude that the proposed merger is unlikely to lead to any substantial
prevention or lessening of competition in any relevant market. Accordingly we
approve the proposed transaction unconditionally.
____________________ 22 December 2011
ANDREAS WESSELS DATE
Medi Mokuena and Andiswa Ndoni concurring
Tribunal researcher: Tebogo Hlafane
For the merging parties: Edward Nathan Sonnenbergs Attorneys
For the Commission: Zanele Hadebe
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