COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 48/LM/APR12
(015008)
In the matter between:
8115222 CANADA INC. Acquiring Firm
And
VITERRA INC. (CORPORATION NO. 449717-1) Target Firm
Panel : Andreas Wessels (Presiding Member)
Takalani Madima (Tribunal Member)
Medi Mokuena (Tribunal Member)
Heard on : 30 May 2012
Order issued on : 30 May 2012
Reasons issued on : 11 July 2012
Reasons for Decision
Approval
[1] On 30 May 2012 the Competition Tribunal (“Tribunal”) unconditionally
approved the large merger between 8115222 Canada Inc. and Viterra Inc.
The reasons for approving the proposed transaction follow below.
Parties to transaction
[2] The primary acquiring firm is 8115222 Canada Inc. (“Canada Inc.”), a
company incorporated in terms of the company laws of Canada. Canada
Inc. is a special purpose vehicle created by Glencore International plc.
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(“Glencore”) for the purpose of acquiring sole ownership of Viterra Inc.
Glencore is a public company with a primary listing on the London Stock
Exchange and a secondary listing on the Hong Kong Stock Exchange.
Glencore is not controlled by any shareholder. Glencore, through its 100%
subsidiary Glencore International AG, controls a number of subsidiaries
worldwide.
[3] The primary target firm is Viterra Inc (“Viterra”), a public company with a
primary listing on the Toronto Stock Exchange and a secondary listing on
the Australian Stock Exchange.
Activities of merging parties
[4] Glencore is a global producer and marketer of commodities. Its worldwide
activities include the production, sourcing, processing, refining,
transporting, storage, financing and supply of metals and minerals, energy
products and agricultural products. In South Africa, Glencore trades
specific metals and metal products, oil-based fuel products and coal, and
sells imported wheat. For the purposes of this transaction, Glencore’s
relevant activity is its sale of wheat in South Africa.
[5] Viterra’s activities involve grain handling and marketing, the sale of
agricultural products and food processing. Its current activities in South
Africa are confined to the sale of grain products such as barley, peas and
wheat.
Proposed transaction and rationale for transaction
[6] The proposed transaction entails Glencore acquiring, through Canada Inc,
100% of the total issued and outstanding common shares of Viterra by
way of a court approved plan of arrangement.
[7] According to Glencore the proposed transaction will allow it to expand and
develop the business of Viterra in a manner that is consistent with its
strategy of strengthening its position in grain and oil seeds marketing. The
integration of Viterra’s grain handling and marketing business with
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Glencore’s larger international distribution and marketing network will
enable Glencore to achieve greater economies of scale, and capture the
associated benefits.
[8] From Viterra’s perspective, their shareholders will be able to realise their
investment.
Relevant market(s) and impact on competition
[9] The Commission found that there is a horizontal overlap in the activities of
the merging parties in respect of the sale and marketing of wheat in South
Africa, since the merging parties are both grain trading firms importing
wheat into South Africa. More specifically, they both sell wheat through
other traders or local agencies in South Africa. They thus operate as grain
traders in the grain value chain, where grain trading includes the
procurement and sale of grain.
[10] In South Africa grain trading occurs either on SAFEX, the futures market
which is predominately used for hedging purposes, or in the physical
market. Participants in the grain market informed the Commission that the
majority of grain trading in South Africa occurs in the physical market, and
that the SAFEX quoted price is used as a reference price for the
transactions. The Commission thus defined the relevant product market as
the market for the trading of physical grain, which includes wheat, but
assessed the competitive effects of the transaction based on the
narrowest possible market, i.e. the trading of wheat.
[11] Viterra has no local presence in South Africa and Glencore uses local
agencies to sell wheat on its behalf in South Africa. We need not decide
the exact parameters of the relevant geographic market for the trading of
physical grain/wheat since it does not alter our decision in this case.
[12] As stated above, in assessing the impact on competition, the Commission
analysed the narrower market for the sale or trading of wheat in South
Africa. In this market the merging parties’ combined post-merger market
Africa. In this market the merging parties’ combined post-merger market
share is below 5%, and it will continue to face competition from other
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wheat traders such as Senwes Ltd, Afgri Ltd, Seaboard and Kaap Agri.
Furthermore no customers of the merging parties raised any concerns or
objected to the merger. We thus agree with the Commission that the
proposed transaction is unlikely to substantially prevent or lessen
competition in any relevant market.
Public Interest
[13] The merging parties submitted that the proposed transaction will have no
adverse effects on employment since they do not foresee any
retrenchments as a result of the merger. 1 No other public interest issues
arise due to this transaction.
Conclusion
[14] Having regard to the facts above, we find that the proposed merger 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 merger unconditionally.
____________________ 11 July 2012
A Wessels DATE
T Madima and M Mokuena concurring
Tribunal researcher: Elizabeth Preston-Whyte
For the merging parties: Paul Coetser of Werksmans Attorneys
For the Commission: Zanele Hadebe and Lindiwe Khumalo
1 Teleconference between the Commission and an employee representative at Glencore on
10 May 2012, see page 14 of the Commission’s Report. Also see merger record page 11.
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