1
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016634
In the matter between:
SMEI Projects Holdco (Pty) Ltd Acquiring Firm
And
SMEI Projects (Pty) Ltd Target Firm
Panel: Norman Manoim (Presiding Member)
Andiswa Ndoni (Tribunal Member)
Mondo Mazwai (Tribunal Member)
Heard on: 05 June 2013
Order issued on : 05 June 2013
Reasons issued on: 12 June 2013
NON-CONFIDENTIAL REASONS FOR THE DECISION
Approval
[1] On 5 June 2013 the Competition Tribunal (the “T ribunal”) unconditionally
approved the acquisition by SMEI Projects Holdco (P ty) Ltd (“SMEI Holdco”)
of SMEI Projects (Pty) Ltd (“SMEI Projects”).
[2] The reasons for the approval of the proposed transaction follow.
2
The parties and their activities
[3] SMEI Holdco was specifically formed to be the h olding company for this
transaction. It has no operations, activities or other interests.
[4] SMEI Projects specialises in the structural, me chanical, piping, electrical and
instrumentation fields
[5] Investec and KDI Mining have minority sharehold ings in SMEI Holdco,
however, Investec will have joint control of SMEI Holdco
1. While Investec does
not have any operations relevant to this merger, it does control DCD-Dorbyl
which is active in the heavy engineering market.
Proposed transaction and rationale
[6] Mr Bates, Mr Pratt and Mr Jones between them cu rrently own 100% of SMEI
Projects. The same 3 individuals collectively own 6 0% of SMEI Holdco.
Investec and KDI Mining each have a 20% shareholding in SMEI Holdco.2
[7] The proposed acquisition of SMEI Projects by SM EI Holdco effectively
reduces the shareholding of the current 3 owners of SMEI Projects to 60%
and introduces 2 new minority shareholders. Once fi nalised, the shareholder
agreement will give Investec and KDI Mining joint control over SMEI Holdco.
[8] The rationale of the transaction for the curren t shareholders is that the
introduction of KDI Mining as a shareholder will im prove SMEI Projects’ BEE
profile and enable them to be more successful in bidding for certain tenders.
[9] The rationale of the transaction for the acquir ing parties is that SMEI presents
an attractive investment opportunity with good grow th potential and a natural
hedge against economic recession.
1 See pages 4 and 5 of the transcript. The final shareholder agreements have not been completed but
this concession was made by the attorney representing the merging parties.
2 Paragraph 6 has been edited to remove confidential information.
3
Market definition and competition analysis
[10] The only potential relevant overlap exists bet ween DCD-Dorbyl and SMEI
Projects.
[11] The Commission found that the two parties’ off erings were not substitutable
with one another, nor was it likely that SMEI Proje cts would enter the heavy
engineering market. This conclusion was supported by the views of customers
and competitors alike who observed that where both parties had tendered or
worked on the same project or for the same customer , the services rendered
were for different phases or components of a projec t. Their views were that
the parties’ offerings were complements rather than substitutes.
[12] We agree with the Commission’s findings on mar ket definition, and hence
there is no relevant overlap between the parties. T here is thus no lessening of
competition likely to result from this merger.
Public interest
[13] The merger parties confirmed that the proposed transaction will have no
adverse effect on employment and informed the relev ant union. The proposed
transaction raises no other public interest concerns.
Conclusion
[14] For the reasons mentioned above, we approve th e proposed transaction
unconditionally.
________________ 12 June 2013
NORMAN MANOIM DATE
Andiswa Ndoni and Mondo Mazwai concurring
4
Tribunal Researcher: Andrew Sylvester
For the Commission: Reabetswe Molotsi
For SMEI Projects and SMEI Holdco: Robert Wilson o f Webber Wentzel