COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 07/LM/Jan12
In the matter between:
Bytes Technology Group
South Africa (Pty) Ltd Acquiring firm
And
Unisys Africa (Pty) Ltd Target Firm
Panel : Yasmin Carrim (Presiding Member)
Takalani Madima (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 28 March 2012
Order issued on : 28 March 2012
Reasons issued on : 14 May 2012
Reasons for Decision
Approval
1] On 28 March 2012 the Competition Tribunal (“Tribunal”) approved the merger
between Bytes Technology Group South Africa (Pty) Ltd and Unisys Africa (Pty)
Ltd. The reasons for approving the proposed transaction follow below.
Parties to the transaction
2] The primary acquiring firm is Bytes Technology Group South Africa (Pty) Ltd (“BTG
SA”), a private company which is ultimately a wholly-owned subsidiary of publicly
traded Allied Electronics Corporation Limited (“Altron”).
3] BTG SA is directly controlled by Bytes Technology Group (Pty) Ltd (“BTG”) and it
offers technical skills and specialised services to support IT infrastructure of
businesses predominantly in the retail and financial sectors. BTG SA has three
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subsidiaries which are relevant to this transaction, namely Bytes Healthcare
Solutions (Pty) Ltd,1 Bytes System Integration (Pty) Ltd2 and Bytes People Solutions
(Pty) Ltd.3
4] Altron’s activities include the telecommunications, multimedia, IT and power
electronics industries by way of three subsidiaries, namely BTG, Power
Technologies (Pty) Ltd and Allied Technologies Limited.
5] The primary target firm is Unisys Africa (Pty) Ltd (“Unisys Africa”), a company
incorporated in terms of the law of South Africa. Unisys Corporation is incorporated
in the United States of America and is the ultimate parent company of Unisys Africa.
6] Unisys Africa provides IT solutions and technology offerings to both public and
private sector customers in sub-Saharan Africa, such as the telecommunications,
energy, financial and other commercial industries.
Proposed transaction
7] In terms of the proposed transaction, BTG SA intends to acquire 70% of the issued
share capital held directly by Unisys Africa. In a separate sale of shares agreement,
BTG SA will acquire 30% of the issued share capital held by CyberKnowledge
Systems Investments (Pty) Ltd.
8] Upon implementation of the transaction, BTG SA therefore will have a 100%
interest in and sole control over Unisys Africa.
Rationale for the transaction
9] The rationale for the proposed merger is that BTG SA will have access to Unisys
Africa’s employee skills, economies of scale and large customer base comprising
petroleum companies and government entities. BTG SA has a newly established
government solutions business which it would be able to boost as a result of the
transaction.
10]Unisys Corporation intends to narrow the focus of its global resources by simplifying
its business structure and as such wants to sell its shares in Unisys Africa.
1 Bytes Healthcare Solutions comprises two subsidiaries, namely Med-e-Mass (Pty) Ltd and
1 Bytes Healthcare Solutions comprises two subsidiaries, namely Med-e-Mass (Pty) Ltd and
Mediswitch (Pty) Ltd, through which IT-based business solutions are provided to the South African
healthcare industry.
2 Bytes System Integration provides designs, implements and manages customised IT solutions
3 Bytes People Solutions
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Impact on competition
11]The Competition Commission (“Commission”) recognised a vertical relationship
between BTG SA and Unisys Africa, as Bytes Connect provides licences and
maintenance services to Unisys Africa for Cosmocom, Nuance and Genesys
Speech Services which Unisys Africa requires for projects with Telkom. The
arrangement with Cosmocom will only run for a further two to three years. It
concerns the systems integration product market with a low estimated market share
of 4.1%. There are various other suppliers who could also carry out this function
and as such we agree with the Commission that this is only a notional vertical
relationship.
12]There is a slight horizontal overlap in the activities of the merging parties in the
broader IT sector, pertaining to cheque processing systems, infrastructure support
services, IT outsourcing and systems integration.
13]The merged entity’s estimated market share will remain below 10% relating to
infrastructure support services, IT outsourcing and systems integration. With
regards to cheque processing services the merged entity will have an estimated
market share below 30%. Although this could be considered a high market share
the Commission found that this is a declining product market because fewer people
are using cheques. The overall decline in cheque processing is approximately 22%
per annum. Moreover, Internet Processing Solutions (Pty) Ltd (“IPS”), a customer of
BTG SA and Unisys Africa, informed the Commission that IPS currently services
60% of this market and therefore the merging parties might have overestimated
their market shares. The large banks are predominantly the customers in this
product market as such countervailing power exists. The high market share
therefore does not raise any competition concerns.
14]Barriers to entry are low and there are sufficient large competitors in all the relevant
14]Barriers to entry are low and there are sufficient large competitors in all the relevant
markets. BTG SA estimates that it has a 4% share of the entire IT market and
Unisys Africa an estimated market share of less than 0.5% of such market. 4The
proposed merger will thus result in a market share accretion of less than 1% in the
total IT market.
15]Therefore the proposed transaction does not affect competition in any relevant
4 See page 17 of the record.
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market.
Public interest
16]The merging parties confirmed that there will be no adverse effect on employment
as a result of the proposed transaction 5. No other public interest issues arise as a
result of this transaction.
CONCLUSION
17]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.
____________________ 14 May 2012
YASMIN CARRIM DATE
Takalani Madima and Medi Mokuena concurring.
Tribunal researcher: Nicola Ilgner
For the merging parties: Bowman Gilfillan
For the Commission: Mogau Aphane
5 See page 20 of the record.
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