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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 016428
In the matter between:
Pacorini Metals Europe (B.V.) (Pty) Ltd Acquirin g Firm
And
Access Freight Group (Pty) Ltd Target Firm
Panel: Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on: 19 June 2013
Order issued on : 19 June 2013
Reasons issued on: 21 June 2013
REASONS FOR THE DECISION
Approval
[1] On 19 June 2013 the Competition Tribunal (the “ Tribunal”) conditionally
approved the acquisition by Pacorini Metals Europe (B.V.) (Pty) Ltd
(“Pacorini”) of Access Freight Group (Pty) Ltd (“AFG”)
[2] The reasons for the conditional approval of the proposed transaction follow.
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The parties and their activities
[3] Pacorini is the acquiring party and is ultimate ly controlled by Glencore
International while AFG, the target firm, is indepe ndently owned in South
Africa.
[4] Both Pacorini and AFG are full-service provider s of logistical and transport
services, including warehousing, for a diverse rang e of commodities. Pacorini
operates in North America, Europe, and Asia (Middle East and Far East) and
AFG operates in Sub-Saharan Africa.
Proposed transaction and rationale
[5] The proposed transaction sees Pacorini acquirin g 70% shareholding and
control of AFG. The rationale is to expand Pacorini ’s global reach into the
Sub-Saharan African region where they currently have no presence.
[6] The rationale for selling by AFG’s shareholders is to earn a return on their
investment.
Market definition and competition analysis
[7] Both the merger parties and the Commission were satisfied with defining the
product market broadly for the purposes of this tra nsaction. This broad
definition included all warehousing, transport and logistics services for
commodities in general despite some minor differences in the way ferrous and
non-ferrous metals are stored. We agree that this b road definition is suitable
for this transaction.
[8] There was also agreement between the merger par ties and the Commission
on the geographic market definition. We agree with the geographic market
definition being the Republic of South Africa for the purposes of this merger.
[9] There is potential for a unilateral concern in this merger because both parties
provide very similar offerings. They, however, oper ate in different geographic
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markets. A lessening in competition due to increase d unilateral market power
is thus unlikely in this merger.
[10] While Pacorini operates in a different geograp hic market to AFG, its parent
company, Glencore, operates in South Africa. Indeed , AFG is the main
provider of warehousing, transport and logistics to Glencore in South Africa.
This introduces a vertical aspect to the merger that warranted address.
[11] Glencore, even after the Xstrata merger, is no t a sufficiently large customer
of warehousing, transport and logistics services to make a customer
foreclosure strategy likely to be successful. It is unlikely that the merger will
give AFG the ability to exclude its rivals in South Africa.
[12] Secondly, because there are a large number of firms in competition with
AFG, they are unlikely to be able to exclude Glenco re’s competitors from the
market through an input foreclosure strategy. Furth ermore, given the
proportion of revenues AFG derives from third party customers, it is also not
incentivised to embark on such a strategy.
[13] We thus conclude that the merger is unlikely t o give rise to either customer
or input foreclosure concerns.
[14] Despite lack of foreclosure concerns, Glencore would now have access to its
rivals’ strategically sensitive information. This i nformation exchange has the
potential to contribute to a coordinated outcome be tween competitors in the
market. For similar reasons, the London Metals Exch ange in Europe has
enforced an Internal Barriers Policy with Pacorini which prevents Glencore
from accessing confidential information about its competitors through Pacorini.
[15] The conditions of the merger approval address the potential coordination
concerns that arise should Glencore have access to their competitors’
strategically sensitive information. The conditions , Appendix A in the attached
order of the Tribunal on 19 June 2013, thus address the issues of cross-
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directorships, treatment of confidential informatio n and a compliance
programme.
Public interest
[16] The merger parties confirmed that the proposed transaction will have no
adverse effect on employment and will not result in any retrenchments in
South Africa. The proposed transaction raises no ot her public interest
concerns.
Conclusion
[17] For the reasons mentioned above, we approve th e proposed transaction
subject to the conditions in Annexure A of our orde r of 19 June 2013 in this
matter.
________________ 21 June 2013
NORMAN MANOIM DATE
Yasmin Carrim and Andreas Wessels concurring
Tribunal Researcher: Andrew Sylvester
For the Commission: Grashum Mutizwa and Thelani L uthuli
For Pacorini and AFG: Paul Cleland of Werksmans