COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 88/LM/Oct11
In the matter between:
HITACHI DATA SYSTEMS EUROPE
HOLDINGS BV PRIMARY ACQUIRING FIRM
And
SHODEN DATA SYSTEMS (PTY) LTD PRIMARY TARGET FIRM
Panel : Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 14 December 2011
Order issued on : 14 December 2011
Reasons issued on : 18 January 2012
REASONS FOR DECISION
Approval
1] On 14 December 2011 the Competition Tribunal (“Tribunal”) approved the
large merger between Hitachi Data Systems Europe Holdings BV and
Shoden Data Systems (Pty) Ltd. The reasons for approving the proposed
transaction follow below.
1
Parties to the transaction
2] The primary acquiring firm is Hitachi Data Systems Europe Holdings BV
(“HDSEH”), a private company incorporated in the Netherlands and a
wholly owned subsidiary of Hitachi Data Systems Corporation (“HDS”).
HDS is a private company incorporated in the United States of America
and wholly owned by Hitachi Limited (“Hitachi”). Hitachi is a public
company that is not controlled by any single shareholder.
3] The primary target firm is Shoden Data Systems (Pty) Ltd (“SDS”), a
private company incorporated in terms of the company laws of the
Republic of South Africa. SDS does not directly or indirectly control any
firm based in South Africa.
Transaction and rationale
4] The proposed transaction will be implemented in terms of a suite of
transactional agreements. In terms of the Share Sale Agreement,
Opiconsivia Trading 209 (Pty) Ltd (“Bidco”) will acquire 100% of the issued
share capital in SDS. Trough implementation of the proposed transaction
SDS will become a wholly owned subsidiary of Bidco. 87.45% of the share
capital in Bidco will be held by Opiconsivia Trading 210 (Pty) Ltd
(“Holdco”), a wholly owned subsidiary of HDSEH.
5] HDSEH wants to sell its products directly into South Africa rather than
indirectly through a single partner and is of the view that the acquisition of
SDS is the best way to achieve this objective. The acquisition of SDS also
provides a foundation for HDSEH to expand its business operations.
6] The sellers of the primary target firm wish to realise their investment.
Activities of merging parties
7] Of relevance to the competition assessment of this transaction is that
HDS is active in the manufacturing and supply of a range of data storage
systems and software. HDS supplies its IT products through its selling arm
HDSEH. It does not sell products directly into South Africa but supplies
2
data storage equipment and software through SDS, its sole value added
reseller in South Africa.
8] SDS, through its strategic partnerships with global technology firms such
as HDS, operates in the broad information, communications and
technology (ICT) market. SDS does not manufacture any products; it
focuses on the sale and distribution of storage solutions and also supplies
server solutions and information technology services (mainly storage and
server administrator services) to customers located throughout South
Africa and several other African countries.
Competition assessment
9] There is no horizontal overlap between the activities of the merging
parties.
10]As stated above, the primary acquiring firm and its subsidiaries are active
in the upstream market for the production and supply of data storage
solutions and software. SDS distributes data storage and server solutions.
The proposed transaction therefore involves the acquisition by a
component manufacturer of its sole value added reseller in South Africa
and thus constitutes a vertical merger.
11]The Competition Commission (“Commission”) concluded that the vertical
integration that arises due to SDS reselling or distributing Hitachi products
is unlikely to result in any foreclosure concerns in relation to either
upstream original component manufacturers or downstream resellers of
the relevant IT products. From a potential input foreclosure perspective the
Commission’s market investigation confirmed that SDS is the sole reseller
of Hitachi products in South Africa. Furthermore, there are alternative
upstream suppliers of storage solutions and software including EMC
Corporation, IBM and Hewlett-Packard. There are also a number of other
participants in the downstream distribution market including Dimension
Data, BCX, Datacentrix, Bytes and TCM.
12]We agree with the Commission’s above vertical assessment of the
3
proposed transaction.
Public interest
13]The proposed transaction will have no adverse effects on employment 1
and does not raise any other public interest concerns.
Conclusion
14] We approve the proposed transaction without conditions.
____________________ 18 January 2012
ANDREAS WESSELS DATE
Norman Manoim and Yasmin Carrim concurring
Tribunal researcher: Thabo Ngilande
For the merging parties: Bowman Gilfillan
For the Commission: Lerato Monareng
1 See pages 11, 53 and 76 of the record.
4