COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:09/LM/Jan12
[013912]
In the matter between:
Zeder Financial Services Ltd Acquiring Firm
And
Agrico Machinery (Pty) Ltd in Target Firm
Respect of Agricol Holdings Ltd
Panel : Yasmin Carrim (Presiding Member)
Andiswa Ndoni (Tribunal Member)
Takalani Madima (Tribunal Member)
Heard on : 28 March 2012
Order issued on : 28 March 2012
Reasons issued on : 29 June 2012
Reasons for Decision
Approval
[1] On 28 March 2012 the Competition Tribunal (“Tribunal”) conditionally
approved the acquisition by Zeder Financial Services Ltd of Agricol
Holdings Ltd. The Tribunal’s reasons for approving this transaction are set
out below.
Parties and their activities
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[2] The primary acquiring firm is Zeder Financial Services Ltd (“ZFS”), a public
company incorporated in accordance with the laws of the Republic of
South Africa. ZFS is controlled by Zeder Investments Ltd (“Zeder”) which
is ultimately controlled by PSG Group Ltd (“PSG”). Zeder does not control
any firm.1 ZFS controls Zeder Investments Corporate Services.
[3] ZFS is an investment holding company and does not sell any products or
provide any services. Zeder is a holding company and does not sell any
products or provide any service. It has investments in companies that are
active in agricultural, food, beverages and related sectors. PSG is an
investment company that invests in companies that provide a wide
selection of financial services and products.
[4] The primary target firm is Agricol Holdings Ltd (“Agricol”), a public
company incorporated in accordance with the laws of the Republic of
South Africa. Agricol is 65.9% controlled by Agrico Machinery (Pty) Ltd
(“AM”).The remaining shares in Agricol are held by ZFS (25.1%) and
Individuals and Trusts(9%). Agricol wholly owns Salok (Pty) Ltd (“Salok”)
and Agricol (Pty) Ltd (“Agricol Company”).
[5] Agricol is a holding company and does not provide any products or
services. Through Salok and Agricol Company, it is involved in plant
breeding, production, international trade, processing and distribution of
seeds.
Description of the transaction
1Zeder has non-controlling interest in the following firms: Kaap Agri Ltd, Capevin Holdings Ltd, MGK
Business Investments Ltd, Overberg Agri Ltd, Capespan Group Ltd, Tuinroete Agri, Suidewes
Beleggings Ltd, NWK Ltd, OVK Bedryf Ltd and Thembeka OVB Holdings.
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[6] This transaction entails an increase in shareholding by ZFS in Agricol from
25.1% to 90%. On completion of the proposed transaction ZFS will have
sole control over Agricol.
Rationale for the transaction
[7] ZFS submitted that Agricol is a sound investment and will complement the
other Agri investments in the Zeder portfolio. AM submitted that this
transaction will enable it to focus on its core business (irrigation and
mechanisation) and further facilitate a simplification of the AM Group
structure.
The relevant market and impact on competition
[8] The Commission found that there is no overlap between the activities of
the merging parties because the acquiring group does not have a
controlling interest in companies that are involved in activities similar to
those of the target firm. Although there is no overlap in the activities of the
merging parties, the Commission investigated whether this transaction is
likely to give rise to some form of anti-competitive behaviour as the parties
have entered into a restraint of trade in the merger agreement which
restrains AM from re-entering the seeds market for a period of six years.
[9] The Commission’s investigation revealed that entry barriers in the seeds
market are high and that there are a few market participants in this market
with relatively high market shares. Based on these findings the
Commission proposed that the period of the restraint be reduced to three
years instead of the six year period initially entered into by the merging
parties, which the Commission found to be too long, unjustified and likely
to frustrate re-entry by AM. The merging parties agreed to the
Commission’s proposal and submitted a signed agreement reflecting the
reduction of the restraint period to three years.
Public interest
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[10] The merging parties submitted to the Commission that the proposed
transaction will not have any significant effect on employment.
Conclusion
[11] The proposed transaction is unlikely to result in a substantial prevention
or lessening of competition as there is no overlap in the activities of the
merging parties. With respect to the restraint of trade period, we agree
with the Commission that a three year period is an acceptable period for
the restraint. Accordingly, we approve the transaction subject to the
attached Annexure “A” conditions.
____________________ 29 June 2012
Yasmin Carrim Date
Andiswa Ndoni and Takalani Madima concurring.
Tribunal researcher: Ipeleng Selaledi
For the merging parties: Susan Meyer of Cliffe Dekker Hofmeyr Inc.
For the Commission: Xolela Nokele
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