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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:89/LM/Oct12
In the matter between:
Imperial Holdings Ltd and Imperial Group (Pty) Ltd Acquiring Firm
And
RTT Group (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
And Andreas Wessels (Tribunal Member)
Heard on : 05 December 2012
Reasons issued on : 20 December 2012
Reasons for Decision
Approval
[1] On 05 December 2012 the Competition Tribunal (“ Tribunal”) approved
the merger between Imperial Holdings Limited (“Impe rial Holdings”)
and Imperial Group (Pty) Ltd (“Imperial Group”), He reinafter referred
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collectively as “Imperial” and RTT Health division from RTT Group
(“RTT Health”). The reasons for approval follow below.
The Transaction
[2] The primary acquiring firms are Imperial Holdin gs Limited and Imperial
Group (“Imperial”), companies incorporated in terms of the laws of the
Republic of South Africa. Imperial is a public list ed company and is not
controlled by any shareholder.
[3] The primary target firm is RTT Health Sciences (“RTT Health”), a
division of RTT Group (Pty) Ltd, a company incorpor ated in terms of
the laws of the Republic of South Africa. RTT Group is a wholly owned
subsidiary of RTT Holdings (Pty) Ltd. RTT Holdings is not controlled by
any firm.
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Activities of the parties
[4] The Imperial Group is involved in a wide range of activities relating to
transportation, including integrated logistics solu tions, car rentals and
vehicle retailing, aviation operations, motor vehic le importation, sales
and after sales services, tourism and financial services.
[5] Imperial Logistics provides logistics and suppl y chain solutions to its
customers comprising a range of services include li ne-haul, local
distribution, consolidation, warehousing and logist ics, transport
brokering and marketing, cross border transport, su pply chain
management and logistics solutions.
[6] RTT Health Sciences (which comprises the RTT Me dical, RTT Trans
Africa, RTT Consumer Health, RTT Scriptworx 2, Fuel Africa, RTT
Kenya and RTT Ghana) is a logistics company which p rovides
customised warehousing facilities and distribution to pharmaceutical,
1 But has the following significant shareholders:
- Actis Logistics Limited
- RMB Investment and Advisory (Pty) Limited
- RMB Ventures Six (Pty) Limited.
2 Scriptworx will not form part of this transaction.
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healthcare distribution and healthcare supply chain . It specialises in
multi-channel solutions for delivering essential me dicines and
consumer health products nationwide as well as to d eveloping markets
across the African continent, including Namibia, Bo tswana,
Mozambique, Zambia, Kenya, Tanzania, Malawi, Uganda , Ethopia,
Rwanda, Ghana, Ivory Coast and Nigeria.
The Rationale
[7] Imperial intends to expand into the pharmaceuti cal logistics market,
where it currently does not operate and views RTT G roup as the
perfect vehicle to realise its objective. The propo sed transaction is also
in line with Imperial’s strategy to expand its divi sions which earn non-
cyclical profits. Imperial’s logistics division (Im perial Logistics) has
historically earned non-cyclical profits for Imperi al Holdings and,
therefore, Imperial Holdings is seeking to increase its exposure to
those types of businesses.
[8] The proposed transaction is also in line with Imperial’s strategy to
expand the Imperial Logistics business and its oper ations into other
African countries. Imperial considers RTT Health to have an
experienced management team with a proven track rec ord in the
pharmaceutical and consumer logistics industry.
[9] RTT Group wishes to sell RTT Health in order to realise value for the
business and assets comprising RTT Health, as it no longer considers
RTT Health to be a core part of RTT Group’s overall business strategy.
In addition, RTT Group’s shareholders, being predom inantly private
equity investment companies, consider that they wil l receive greater
value in disposing of RTT Health business out to te nder and Imperial
was selected as the successful bidder due to its at tractive offer to RTT
Group for the RTT Health business and assets.
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The relevant market and the impact on competition
Horizontal relationship
[10] From the supply and demand side there are no c lear distinctions
between the logistics services required in respect of FMGC, and those
required in respect of other consumer goods.
[11] In other words, there are no real differences in the skills and
infrastructure required to transport FMCG, and thos e required to
transport other general consumer goods. Therefore, firms that provide
warehousing and logistic services in respect of FMC G are also able to
(and in most cases do) provide logistics services i n respect of other
consumer goods. In addition, customers often requir e their logistics
service providers to supply logistics services in r espect of both FMCG
and general consumer goods. It is therefore submitt ed that the relevant
market comprises logistics services for both FMCG a nd other
consumer goods (“consumer logistics market”).
[12] The merging parties submitted that pharmaceuti cals distribution
market comprises a separate market from the distribution of FMCG and
other consumer goods. This is due both to regulatory requirements and
the specialist storage and distribution infrastruct ure peculiar to this
segment.
[13] If pharmaceutical logistics services comprise a separate market then,
there is no overlap between the merging parties, as Imperial currently
does not provide any services in this market. Imper ial currently does
not have the requisite infrastructure to warehouse and transport
scheduled pharmaceutical products and medicines, no r does it hold
any pharmaceutical, medical or related services lic ences relating to the
distribution of scheduled medicines. Imperial also does not currently
have any interests in any entity operating a pharma ceutical logistics
business.
[14] It is however noted that Imperial is in the pr ocess of applying for
various licences and approvals required to warehous e and transport
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regulated Schedule Zero goods. These goods, althoug h regulated by
the Medicines Control Council, do not require speci alist infrastructure
or skills to be transported (other than having appr oved warehouse
facilities) and are in most instances delivered to ordinary retail outlets
as with other FMCG and general consumer goods. In o ther words,
unlike Schedule two to six medicines, which require licences and
specialist cold-chain equipment and infrastructure to be distributed to
registered pharmacies and hospitals, Schedule Zero goods can be
distributed by a general consumer logistics firm (s ubject to obtaining
necessary approvals) without specialist infrastruct ure or skills to
ordinary retail outlets such as supermarkets.
[15] Therefore, the merging parties submitted that the warehousing and
distribution of Schedule Zero goods should be regar ded as falling into
the general consumer logistics market, as opposed t o the
pharmaceutical logistics market.
[16] There will however be an overlap between the parties in respect of the
market for warehousing and distribution of FMCG and other consumer
goods. Here Imperial’s activities overlap with thos e of RTT’s Essential
business unit. However, it is common cause that the increment to
Imperial’s market share would be no more 2%.
3 The Commission
concluded that this increment is too small to raise any significant
concerns.
Vertical relationship
[17] RTT and its constituents businesses do not cur rently purchase any
products or services from Imperial, or vice versa. However, RTT Health
procures outsourced fleet services from RTT Solutio ns (a division
which will not form part of the transaction) as wel l as from other
independent third parties, which are similar to the fleet services of
Imperial. Imperial is expected to provide fleet ser vices to the RTT
3 Whilst there is no dispute regarding RTT’s market share, there was disagreement regarding that of
Imperial. In its recommendation the Commission put this figure at 35%. The merging parties suggest
that the figure is unreliable and that it is something like 15 to 20%.
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Health group, post-merger. However, given the small size of the RTT
Health services the provision of services is not currently significant
CONCLUSION
[18] There are no significant public interest issue s and we accordingly
agree with the Commission’s recommendation and ther efore approve
the transaction without conditions.
____________________ 20 December 2012
N Manoim DATE
Yasmin Carrim and Andreas Wessels concurring.
Tribunal Researcher: Thabo Ngilande
For the merging parties:
Webber Wentzel
For the Commission: Takalani Ramavhoya