COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 57/LM/May12
(015107)
In the matter between:
DHN Drinks (Pty) Ltd Acquiring Firm
And
Sedibeng Breweries (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Andreas Wessels (Tribunal Member)
Yasmin Carrim (Tribunal Member)
Heard on : 18 July 2012
Order issued on : 18 July 2012
Reasons issued on : 08 August 2012
Reasons for Decision
Approval
1] On 18 July 2012 the Competition Tribunal (“Tribunal”) unconditionally
approved the merger between DHN Drinks (Pty) Ltd and Sedibeng
Breweries (Pty) Ltd. Our reasons for approving the transaction are set out
below.
Background
2] In 2003 Diageo Highlands, Heineken International and Namibian
1
Breweries Limited consolidated their sales, marketing and distribution
functions by forming a cost-sharing joint venture known as Brandhouse
Beverages (Pty) Ltd (“Brandhouse”) 1 under which they currently market,
distribute and sell their products in South Africa.
3] The merging parties and Competition Commission (the “Commission”)
agree that the present transaction is an ‘internal restructuring’ 2 to bring
further effect to existing agreements between Diageo Highlands, Heineken
and Namibian Breweries Limited.
The parties to the transaction
4] The acquiring firm is DHN Drinks (Pty) Ltd (“DHN”), a company
incorporated in terms of the laws of the Republic of South Africa. DHN was
formed through a transaction we approved in 20083 and is jointly controlled
by:
i.Diageo Highlands4 (“Diageo”) 42.25%;
ii.Heinkeken International5 (“Heineken”) 42.25%; and
iii.Namibian Breweries Limited6 (“NBL”) 15%.
5] DHN, which is a brand holding and profit sharing company with no
employees, was formed by Diageo, Heineken and NBL as a special
purpose vehicle in order to continue their relationship after the successful
implementation and operation of Brandhouse which is still in existence
1 Brandhouse’s product portfolio includes brands such as Johnnie Walker, Smirnoff, J&B,
Bell’s, Captain Morgan, Jose Cuervo, Baileys, Heineken, Amstel, Windhoek and Guinness.
http://www.brandhouse.co.za/BrandhouseStory.aspx
2 Transcript page 2.
3 Tribunal Case No: 17/LM/Feb08.
4 A public company incorporated in the Netherlands and listed on the both the New York
Stock Exchange and the London Stock Exchange.
5 A public company incorporated in the Netherlands and listed on the Euronext Stock
Exchange in Amsterdam.
6 A public company incorporated in Namibia and listed on the Namibian Stock Exchange.
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today.
6] The target firm, Sedibeng Breweries (Pty) Ltd (“Sedibeng”), is a company
incorporated in terms of the laws of the Republic of South Africa and
operates as a brewery located in the south of Johannesburg. Sedibeng’s
current shareholders are Heineken (75%) and Diageo (25%). Sedibeng’s
entire output is dedicated to the DHN shareholders and is distributed by
Brandhouse.
7] The Sedibeng brewery plant was established by Heineken and Diageo for
the purpose of brewing their own products in South Africa and in order to
effectively compete with the dominant South African Breweries Ltd
(“SAB”).
The transaction
8] The transaction entails DHN acquiring 100% interest in Sedibeng from
Heineken and Diageo. Post merger, Diageo, Heineken and NBL will each
own indirect shareholding in Sedibeng through their DHN shareholding.
9] NBL will therefore acquire 15% indirect shareholding in Sedibeng, Diageo
will increase its shareholding in Sedibeng from 25% to 42.25% and
Heineken’s shareholding will reduce to 42.25%.
10]The proposed merger therefore results in Diageo, Heineken and NBL all
having indirect shareholding in Sedibeng in direct proportion to their DHN
shareholding.7
7 See paragraph 4 above.
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Competition Analysis
11]At the hearing the Competition Commission (“the Commission”) stated that
“[the] parties have also submitted that the establishment of the Sedibeng
Breweries has helped established them as a manufacturing presence in
South Africa and can therefore compete effectively with SAB. Also, the
merging parties have further indicated that the merger will enhance
competition in the beer markets, as they may now effectively compete with
SAB.”8
12]Further, the parties herein are already marketing, selling and distributing
their beer, ciders and ready to drink brands through their joint venture,
Brandhouse, which we previously approved.9
13]DHN already holds the rights to the alcoholic beverage products brewed at
Sedibeng. The Commission found that there is no overlap in the activities
of DHN and Sedibeng. There is a vertical relationship between the
merging parties but this existed pre-merger.
14]Further at the hearing, in reply to questions from Tribunal, the parties
confirmed that they notified the 2008 transaction as a sales, marketing and
distribution joint venture in terms of which their respective products would
be pooled through Brandhouse and that Brandhouse would have
discretion over their pricing.10
8 Transcript page 2.
9 Ibid.
10 Transcript page 5-6.
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15] The present transaction does not change the structure and dynamics 11 of
the markets in which the parties operate.
16]The Commission therefore found that the proposed merger is unlikely to
lead to a substantial lessening or prevention of competition and
recommends unconditional approval thereof.
Public Interest
17]The merging parties submit that they do not anticipate that any
retrenchments will occur as a result of the proposed transaction as it is
merely an internal restructuring of ownership in Sedibeng 12 by all three
joint venture parties.
18]The establishment of Sedibeng has in fact lead to the creation of
employment opportunities.
Conclusion
19]We accept the Commission’s conclusions and their analysis of the above
transaction. We further accept that, on the information submitted, the
proposed transaction does not lead to any changes in market structure
and that it is essentially a restructuring in line with the joint venture
partners’ agreements.
20]The above merger is therefore approved without conditions.
11 Form CC4(2) submitted by DHN at page 14 of the Merger Record.
12 Transcript page 2.
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____________________ 08 August 2012
Yasmin Carrim DATE
N Manoim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Anthony Norton of Nortons Incorporated.
For the Commission: Thelani Luthuli and Grace Mohamed
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