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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016303
In the matter between:
Opiconsivia Investments
Acquiring Firm
265 (Pty Ltd
And
Union Carriage and
Wagon Company (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
and Merle Holden (Tribunal Member)
Heard on : 25 April 2013
Order issued on : 25 April 2013
Reasons issued on : 08 May 2013
Reasons for Decision
Approval
[1] On 25 April 2013, the Competition Tribunal (“Tr ibunal”) unconditionally
approved the merger between Opiconsivia Investments 265 (Pty) Ltd
(“Opiconsivia 265”) and Union Carriage and Wagon Co mpany (Pty) Ltd
(“UCW”) in respect of the business of UCW. The reasons for approving the
proposed transaction follow below.
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Parties to the Transaction and rationale
[2] The acquiring firm is Opiconsivia 265, a specia l purpose company that
was formed for the purposes of carrying out the pro posed transaction,
and as such does not conduct any business activitie s. Opiconsivia 265
is controlled by CTE Investments (Proprietary) limi ted (“CTE
Investments”) through a holding company called Opic onsivia 268
(Proprietary) Limited (“Opiconsivia 268”) and the I ndustrial
Development Corporation (“IDC”). The management and employees
hold the remaining shares in Opiconsivia 265.
[3] CTE Investments, which is controlled by Ms Patr icia Norris, refurbishes
rolling stock belonging to Metrorail a subsidiary o f the Passenger Rail
Agency of South Africa (“PRASA”) in its facilities in Pietermaritzburg
and Western Cape.
[4] The target firm UCW also refurbishes rolling st ock for Metrorail but has
its facilities in Nigel, in Gauteng. Unlike CTE Inv estments, UCW also
provides additional services, and is involved in th e design,
manufacture, sale, overhaul and refurbishment of lo comotives, and
rolling stock.
[5] UCW is currently a subsidiary of Murray and Rob erts a construction
and engineering group. Murray and Roberts no longer considers UCW
a core business in their group. CTE Investments wi shes to expand its
activities beyond their present scope.
The relevant market and the impact on competition
[6] The proposed transaction gives rise to a horizo ntal overlap as CTE
Investments and UCW are both active in the market f or the
refurbishment of rolling stock.
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[7] However the merging parties argued that the par ties do not operate in
the same geographic market. They contended that ref urbishment
services are limited to the location of a particula r region whose rolling
stock they serve and that PRASA does not contract w ith firms outside
of these regions to service its trains. Thus CTE se rves the KZN and
Western Cape regions whilst UCW serves Gauteng. The Commission
accepted this was the case. For this reason it conc luded that the
parties were not competitors. We questioned the me rging parties on
this aspect during the hearing. We were told that s ince the trains to
which these services apply, operate regionally, it makes sense from a
cost and practical point of view to provide repair services on a regional
basis only.
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[8] It was further submitted by the merging parties during the hearing that
the barriers to enter more than one region are high , as one needs an
initial investment of approximately R60 million, ve ry large premises to
set up a whole new facility, and also approval from PRASA for a
second site, and PRASA does not easily approve a co ntract unless
PRASA is satisfied that the repair will operate in a sustainable way in a
given region. 2
[9] The Commission submitted that there was a lot o f engagement with
PRASA during the investigation, and as such they ha d no objection to
the proposed transaction.
[10] In light of the above, we find that the transa ction would not
substantially prevent or lessen competition the rel evant markets. There
are two reasons for coming to this conclusion. The parties are not in
the same geographic market and secondly, and perhap s more
significantly, this is a market with a single custo mer, PRASA which
exercises monophony power over its service providers and can through
tenders it awards sponsor new entry if it so wishes.
1 See Transcript para 10 page 5.
1 See Transcript para 10 page 5.
2 See Transcript page 6-7. The merging parties went further to submit that the only reason they got the
contract to operate in Durban was only because there was only one supplier at that time and there was
need for a second supplier.
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CONCLUSION
[11] There are no significant public interest issue s and we accordingly
approve the transaction without conditions.
____________________ 08 May 2013
Norman Manoim DATE
Yasmin Carrim and Merle Holden concurring.
Tribunal Researcher: Caroline Sserufusa
For the merging parties:
Lesley Morphet of Webber Wentzel
For the Commission: Zanele Hadebe