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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016311
In the matter between:
CA Sales Holding (Pty) Ltd Acquiring Firm
And
Pack ‘n Stack Investment Holdings (Pty) Ltd Target Firm
Panel : Norman Manoim (Presiding Member),
Takalani Madima (Tribunal Member)
and Andiswa Ndoni (Tribunal Member)
Heard on : 12 June 2013
Order issued on : 12 June 2013
Reasons issued on : 21 June 2013
Reasons for Decision
Approval
[1] On 12 June 2013, the Competition Tribunal (“Tri bunal”) conditionally
approved the merger between CA Sales Holding (Pty) Ltd (“CA Sales”)
and Pack ‘n Stack Investment Holdings (Pty) Ltd (“Pack & Stack”), in terms
of which CA Sales will acquire 40% of the total iss ued share capital of
Pack & Stack with an irrevocable right and option t o acquire a further
27.1% of the issued share capital of Pack & Stack. Our reasons follow
below.
The Parties and their activities
[2] The primary acquiring firm is CA Sales which is the parent company of a
group of businesses that operate in Southern Africa and act as agents for
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manufacturers of fast-moving consumer goods (“FMCG” ). CA Sales is
controlled by PSG Group Limited (“PSG”) a public co mpany listed on the
Johannesburg Stock Exchange (“JSE”). CA Sales broad ly offers sales,
merchandising, warehousing, distribution and debtor s’ administration
services. However in the Republic of South Africa, CA Sales only offers
sales and merchandising services to the Spar house brands.
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[3] The target firm is Pack & Stack which is a sale s and merchandising
business, operating in retail and wholesale stores representing
manufacturers of FMCG. Such retailers include Pick ‘n Pay, Shoprite,
Checkers, Spar, Clicks, Metcash amongst others.
The relevant market and the impact on competition
[4] It is common cause between the Commission and the merging parties
that there is a horizontal overlap in the activitie s of the merging parties as
they are both active in the market for the provisio n of sales and
merchandising services for manufacturers of FMCG. E ssentially these
firms are responsible for packing of manufacturers goods on retailers’
shelves. The Commission however found no reason for concern about this
overlap in activities as the merged entity has a sm all market share and the
increment is insignificant; from 6% to 6.5%. Market players such as
Smollan, 3D Marketing, VMS Group, GP Harding, among st others, would
continue to discipline the merged entity post merger.
[5] The Commission also considered the potential fo r foreclosure post merger,
given that Pioneer Foods Group Limited (“Pioneer Fo ods”) (in which PSG
also has a shareholding) is a major manufacturer of FCMGs. The
Commission concluded after a detailed investigation that neither customer
nor input foreclosure were likely post merger.
The Call Option
[6] As noted above, the transaction involves an ini tial purchase by CA Sales
of 40 % of the target firm’s equity, with the right to exercise a call option to
acquire a further 27.1 %. 2 Since it was not clear if the call option might b e
acquire a further 27.1 %. 2 Since it was not clear if the call option might b e
exercised within the 90 day period provided for in the Call option
agreement, the Commission was willing to concede th at the transaction
would not be required to be re-notified, provided t he option was exercised
during this period. However if the option was exerc ised at some date
thereafter, the Commission argued that the transact ion should be re-
notified, as market conditions might have changed. The merging parties
1 See page 5 of Transcript of hearing.
2 Clause 4.2.1 of the Call Option Agreement, see page 114 of merger record.
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accepted this proposal and agreed that it should be made as a condition
for the approval of the merger.
[7] We consider this approach reasonable. Technica lly, the later exercise of
the option would make what is presently an acquisit ion of joint control, an
acquisition of sole control. Ordinarily that would entail a further merger
notification, but the condition obviates the need for doing so.
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[8] There are two reasons why the condition is appr opriate on the present
facts. Firstly, the period allowed for the exercise of the option is limited and
market conditions prevailing at present are unlikel y to change significantly
in this period. Secondly, the Commission has analys ed the merger as if it
was one entailing the acquisition of sole control, not just one of joint
control. Thus the change in control contemplated by the exercise of the
call option has been foreshadowed in its present an alysis, provided it is
exercised timeously. The condition is thus a reason able compromise
between the public interest in having effective con trol of mergers and the
private interests of the merging parties in not being burdened by excessive
compliance requirements. 4
Our Analysis
[9] We asked the Commission during the hearing if it had contacted Spar for
its views on the transaction given that it was the sole customer of the
acquiring firm. It transpired that it had not been consulted. The
Commission has since rectified this at our instance and has, after our
hearing, obtained written confirmation from Spar th at it has no concerns
about the transaction. 5
[10] There were no public interest concerns, and th e proposed transaction
had no effect on employment.
CONCLUSION
[11] The proposed transaction is unlikely to substa ntially lessen or prevent
competition and we therefore approved it subject to the following condition
related to the exercise of the call option:
related to the exercise of the call option:
3 See our decision in Ethos Private Equity Fund IV & The Tsebo Outsourcing Group (Pty) Ltd:
30/LM/Jun03 at para37-40, page 9.
4 Ibid
5 See page 10 of Transcript of hearing.
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[12] “ Should CA Sales not exercise the call option within the 90 days period
as envisaged by clause 4.2.1 of the Call Option Agr eement filed with the
merger notification and decide to acquire additiona l shareholding that
results in CA Sales owning more than half of the is sued share capital of
Pack & Stack at a later date, outside the aforesaid 90 (ninety) day period,
then the merging parties will again seek competitio n approval before
implementing the acquisition.”
____________________ 21 June 2013
Norman Manoim DATE
T Madima and A Ndoni concurring.
Tribunal Researcher: Caroline Sserufusa
For the merging parties:
Susan Meyer for Cliffe Dekker
For the Commission: Tshegofatso Radinku