WBHO Industrial Holdings (Pty) Ltd v Capital Africa Steel (Pty) Ltd (016733) [2013] ZACT 90 (19 August 2013)

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[2013] ZACT 90
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WBHO Industrial Holdings (Pty) Ltd v Capital Africa Steel (Pty) Ltd (016733) [2013] ZACT 90 (19 August 2013)

COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 016733
In
the matter between:
WBHO
Industrial Holdings (Pty) Ltd
The
Brait Entities
Acquiring
Firms
And
Capital
Africa Steel (Pty) Ltd
Target
Firm
Panel
Andreas
Wessels (Presiding Member)
Anton
Roskam (Tribunal Member)
Mondo
Mazwai (Tribunal Member)
Heard
on
24
July 2013
Order
issued on
24
July 2013
Reasons
issued on :
19
August 2013
Decision
Approval
1.
On 24 July 2013, the Competition tribunal (“Tribunal”)
unconditionally approved the transaction involving WBHO Industrial

Holdings (Pty) Ltd (“WBHO Industrial”) and the Brait
Entities, the acquiring firms, and Capital Africa Steel (Pty)
Ltd
(“CAS”), the target firm,
2.
The reasons for the approval of the proposed transaction follow.
Merging
parties and their activities
3.
The primary acquiring firms are (i) WBHO Industrial; and (ii) the
Brait Entities.
4.
WBHO Industrial is a wholly-owned subsidiary of Wilson Bayly Holmes-
Ovcon Limited (“WBHO Ltd”), a company listed
on the
Johannesburg Securities Exchange Ltd (“JSE”). One of WBHO
Ltd’s wholly-owned subsidiaries is WBHO Construction
(Pty) Ltd
(“WBHO Construction”).
5.
WBHO Ltd and WBHO Industrial are holding companies which do not offer
any services and/or sell any products. WBHO Construction
and the
firms controlled by it are involved in the construction industry,
inter
alia
in the construction of commercial and residential buildings, mining
infrastructure, reinforced concrete structures, dams, reservoirs,

sewerage works, bridges, railways, airports and pipelines.
6.
WBHO Industrial currently holds 50% of the issued share capital of
CAS, the primary target firm.
7.
The Brait Entities are comprised of Brait South Africa Limited, a
wholly- owned subsidiary of Brait Societas Europaea (“Brait

SE”), which in turn ultimately manages the Brait Fund IV
private equity fund. Brait SE is listed on the Luxembourg Stock

Exchange (“LSE”) and the JSE. The Brait Entities invest
in privately owned businesses in
inter
alia
emerging markets.
8.
The Brait Entities currently hold 40% of the issued share capital of
CAS.
9.
The primary target firm is CAS. The other current shareholder in CAS
other than WBHO Industrial and the Brait Entities is Carlmac
(Pty)
Ltd (“Carlmac”), with a 10% shareholding in CAS. CAS is
currently jointly controlled by WBHO Industrial and the
Brait
Entities.
10.
CAS’s main activities include the manufacture and supply of
steel products as well as the supply of stone and concrete
aggregate
products to the construction, civil engineering and mining industries
in Southern Africa. It is comprised of two divisions,
namely (i) the
Reinforcing and Mesh Solutions (RMS) division; and (ii) the Symo
division. The RMS division manufactures and distributes
rebar and
mesh in various provinces throughout South Africa (with the exception
of the Northern Cape). The Symo division manufactures
steel products
which include shelving, racking and storage products, steel doors,
hardware and others customised steel products.
CAS also manufactures
and supplies steel piping to the water, oil and gas markets in Africa
and abroad.
Proposed
transaction
11.
In terms of the proposed transaction Carlmac wishes to dispose of its
10% shareholding in CAS. CAS has agreed to buy back the
shares from
Carlmac. As a result of this share buyback, the shareholding
percentages of the other existing shareholders of CAS,
i.e. WBHO
Industrial and the Brait Entities, will each increase by 5%.
Post-transaction, WBHO Industrial will therefore own 55%
of the
issued ordinary share capital of CAS and the Brait Entities will own
the remaining 45%. The implementation of the transaction
will thus
result in WBHO Industrial acquiring sole control of CAS, whereas, as
stated above, it was previously jointly controlled
by WBHO Industrial
and the Brait Entities.
Competition
analysis
Background
12.
According to the Competition Commission (“Commission”),
the proposed transaction results from conditions that it
imposed on
an intermediate merger between Primeprac (Pty) Ltd and Murray &
Roberts Retail Asset Management (Pty) Ltd (“the

Primeprac/Murray & Roberts merger”).
1
The Commission imposed the conditions in order to address the
concerns relating to cross-directorships and information sharing
in
respectively the rebar and mesh markets. As part of the imposed
conditions, Carlmac was ordered to dispose of its 10% shareholding
in
CAS.
Horizontal
assessment
13.
After investigating the proposed transaction the Commission concluded
that there is no horizontal overlap between the activities
of the
merging parties since the WBHO group and CAS do not provide products
or services that are considered to be substitutes.
Thus, from a
horizontal perspective the proposed transaction has no effect on
competition.
Vertical
assessment
14.
There is a vertical aspect to the proposed transaction since CAS
supplied the WBHO group with construction material such as
rebar,
mesh, concrete, sand, stone and aggregates, steel shelving and
racking.
15.
The Commission however found that the merging parties’ market
positions in the affected vertical markets are such that
it is
unlikely that this transaction will result in either input or
customer foreclosure concerns. Furthermore, the competitors
of WBHO
indicated that they have alternative suppliers of the relevant input
products. We note that none of the customers or competitors
contacted
by the Commission as part of its market investigation raised any
concerns regarding the proposed transaction, including
its vertical
aspects.
16.
We have no reason to doubt the Commission’s finding on the
vertical analyses and do not deal with the vertical aspects
of this
transaction in any further detail in these reasons.
History
of collusion and coordination effects
17.
Although both WBHO and CAS have been implicated in cartels, the
Commission found that the current transaction is unlikely to
lead to
coordinated effects.
18.
In relation to WBHO, the Commission in September 2009 initiated an
investigation in the construction industry following a leniency

application from Group Five (Pty) Ltd. In February 2011 the
Commission invited implicated firms to settle under the so-called
“construction fast track project”. On conclusion of its
investigation into the matter, the Commission found that 21
firms in
the construction industry, including WBHO, had been involved in bid
rigging and cover pricing in relation to some 300
construction
projects throughout South Africa in contravention of section 4(1 )(b)
of the
Competition Act of 1998
2
(“the Act”). WBHO has since accepted liability in
relation to certain projects and settled with the Commission in June

2013. The Tribunal on 22 July 2013 confirmed the consent agreement
related to the above-mentioned construction fast track project

entered into between the Commission and WBHO Construction. In terms
of this consent agreement, WBHO must
inter
alia
submit a copy of its competition law compliance programme to the
Commission within 60 days of the Tribunal’s confirmation
of the
agreement.
3
In particular, such compliance programme will include mechanisms for
the monitoring and detection of any contravention of the Act.
4
19.
In relation to CAS, the Tribunal in May 2012 found that Reinforcing
Mesh Solutions Pty (Ltd) (“RMS”), a subsidiary
of CAS,
had contravened
sections 4(1
)(b)(i) and (ii) of the Act for a period
of four years from January 2004 to January 2008 in relation to the
market for the supply
of mesh.
5
20.
As already stated in paragraph 12 above, the proposed transaction is
aimed at addressing the competition concerns relating to

cross­directorships and information sharing resulting from the
Primeprac/Murray & Roberts intermediate merger. Given the
above
factor and the nature of the this proposed transaction (i.e. a change
from joint to sole control of CAS, see paragraph 11
above), we concur
with the Commission’s view that this transaction is unlikely to
lead to or enhance coordinated effects
in any market.
Conclusion
21.
Based on the above factors, we conclude that the proposed merger is
unlikely to substantially prevent or lessen competition
in any
relevant market.
Public
interest
22.
The merging parties confirmed that the proposed transaction will have
no adverse effect on employment and that it will not result
in any
job losses or retrenchments.
6
Furthermore, the proposed transaction raises no other public interest
concerns.
Conclusion
23.
For the reasons mentioned above, we approve the proposed transaction
unconditionally.
ANDREAS
WESSELS
19
August 2013
Date
Anton
Roskam and Mondo Mazwai concurring
Tribunal
researcher: Ipeleng Selaledi
For
the merging parties: Pia Harvey of Cliffe Dekker Hofmeyr Inc.
For
the Commission: Gilberto Biacuana
1
This
intermediate merger was approved by the Commission in December 2012
(Commission Case no. 2012Sep0582).
2
Act
No. 89 of 1998, as amended.
3
Clause
9.3 of the consent agreement.
4
Clause
9.2 of the consent agreement.
5
Tribunal
case no. 84/CR/Dec09. RMS appealed the Tribunal’s decision to
the Competition Appeal Court (“CAC”)
in respect of the
penalty imposed, but not in relation to the contravention finding.
6
See
merger record, pages 10 and 57.