COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 104/LM/Nov11
In the matter between:
Humulani Investments (Pty) Ltd Acquiring Firm
And
Equipment Spare Parts (Africa) (Pty) Ltd Target Firm
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Takalani Madima (Tribunal Member)
Heard on : 07 March 2012
Order issued on : 07 March 2012
Reasons issued on : 18 April 2012
Reasons for Decision
Approval
1] On 07 March 2012 the Competition Tribunal (“Tribunal”) approved the
merger between Humulani Investments (Pty) Ltd and Equipment Spare
Parts (Africa) (Pty) Ltd. The reasons for approving the proposed
transaction follow below.
Parties to transaction
2] The primary acquiring firm is Humulani Investments (Pty) Ltd
(“Humulani”). Humulani is controlled by Invicta Holdings Limited
(“Invicta”) which holds 75% of the issued share capital of Humulani; the
remaining shareholding in Humulani is held by Theramanzi
Investments (Pty) Ltd and the Humulani Empowerment Trust, with a
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20% and 5% interest respectively. Humulani controls various
subsidiaries.
3] Invicta is an investment holding and management company. Humulani
is the operating holding company of all the Invicta Group operations.
The operating divisions of the Invicta Group are Bearing Man Group
(“BMG”); Capital Equipment Group (“CEG”); and Tiletoria.
4] BMG is a specialist distributor of bearings, seals, power transmission
components, electric and geared motors, belting, fasteners, filtration
and hydraulics predominately used in the design, assembly,
maintenance and service of machinery in industrial plants.
5] CEG imports and distributes original manufactured capital equipment
and related spare parts of original equipment manufacturers (“OEMs”).
These OEM spare parts are brand-specific and specifically designed
for the use and maintenance of specific branded earthmoving, ground-
engaging, construction and industrial machinery.
6] Tiletoria imports and distributes tiles and related sanitary ware.
7] The primary target firm is Equipment Spare Parts (Africa) (Pty) Ltd
(“ESP”). ESP is controlled by GB South Africa S.p.A (“GB South
Africa”) which owns 75% of the issued share capital of ESP. GB South
Africa is part of the GB South Africa Group. ESP does not control any
firm.
8] ESP procures and distributes non-OEM parts through various divisions.
Through these divisions, ESP specialises in the procurement,
distribution and retail of non-OEM aftermarket parts and replacement
parts including ground engaging tools for earthmoving equipment; parts
for Caterpillar and Komatsu-branded earthmoving and construction
equipment; parts for Caterpillar, Cummins, Detroit and Komatsu heavy
duty diesel engines; parts for a range of trucks; and undercarriage
parts for earthmoving equipment. ESP also manufactures ground
engaging tools primarily for Caterpillar and Komatsu earthmoving
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equipment.
Proposed transaction and rationale for transaction
9] The proposed transaction involves Humulani’s acquisition of 100% of
the issued share capital of ESP. Upon implementation of the
transaction Humulani will thus have sole control over ESP.
10]According to the acquiring group the rationale for the proposed
transaction is that it will expand the operations of the Invicta Group’s
existing CEG operating division. It further submitted that ESP post-
merger will be able to leverage off efficiencies generated by the bulk
purchasing volumes of the broader Invicta Group.
11]The proposed transaction will enable GB South Africa to focus on its
core business activities.
Relevant market(s) and impact on competition
12]According to the Competition Commission’s competition assessment,
the proposed transaction will result in a horizontal overlap in the
activities of the merging parties and potential vertical effects.
13]The Commission did not take a definitive view on the exact parameters
of the relevant market(s), but concluded that a horizontal overlap exists
between the activities of the merging parties in a potential national
market for the procurement and distribution of non-OEM spare parts for
ground engaging, industrial and construction machinery. The post-
merger market share of the merged entity in this market would be less
than 5%. The Commission furthermore found that the competitors in
this potential market include Centrax South Africa, Rocktech
Earthmoving Wear Parts, Barloworld and ITR Africa Group. The
proposed transaction therefore, from a horizontal perspective, is
unlikely to substantially prevent or lessen competition.
14]The Commission further concluded that a vertical overlap exists in
relation to the Invicta Group’s purchases from ESP of non-OEM
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undercarriage and ground engaging tool spare parts. The Commission
however concluded that input foreclosure effects as a result of the
proposed deal are unlikely due to the limited nature of historic
purchases of the Invicta Group from ESP. In relation to potential
customer foreclosure the Commission contacted relevant competitors.
These competitors raised no customer foreclosure concerns since their
customers mainly consist of individuals and firms who own
earthmoving, ground engaging, industrial and construction machinery,
who are mainly construction and mining firms.
15]We have no reason to doubt the Commission’s findings.
Public interest
16]The merging parties confirmed that there will be no adverse effect on
employment as a result of the proposed transaction. 1 Furthermore, no
other public interest issues arise as a result of this transaction.
CONCLUSION
17]Given the above, we conclude that the proposed transaction is unlikely
to substantially prevent or lessen competition in any relevant market.
Furthermore, the proposed transaction raises no public interest
concerns. Accordingly, we approve the proposed merger
unconditionally.
____________________ 18 April 2012
ANDREAS WESSELS DATE
Medi Mokuena and Takalani Madima concurring
Tribunal researcher: Nicola Ilgner
For the merging parties: Edward Nathan Sonnenbergs Inc.
For the Commission: Dineo Mashego
1 See pages 48 and 111 of the merger record.
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