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[2013] ZACT 94
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Newshelf 1261 (Pty) Ltd v Construction Products Division of Murray & Roberts Ltd (017178) [2013] ZACT 94 (20 September 2013)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No.: 017178
In
the matter between
Newshelf
1261 (Pty) Ltd
Primary
Acquiring Firm
And
The
Construction Products Division of
Murray
& Roberts Ltd
Primary
Target Firms
Panel: Andreas
Wessels (Presiding Member)
Anton
Roskam (Tribunal Member)
Imraan
Valodia (Tribunal Member)
Heard
on: 11 September 2013
Order
issued on: 11 September 2013
Reasons
issued on : 20 September 2013
Decision
Approval
[1]
On 11 September 2013, the Competition Tribunal (“Tribunal”)
unconditionally approved the acquisition by Newshelf
1261 (Pty) Ltd
(“Newshelf) of the Construction Products Division of Murray &
Roberts Ltd.
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Acquiring
firms
[3]
The primary acquiring firm is Newshelf. Newshelf is a newly
incorporated shelf company jointly controlled by (i) Capitaiworks
Equity Partners (Pty) Ltd (“CWEP”); and (ii) RMB Ventures
Six (Pty) Ltd (“RMBV”). The remaining shareholders
in
Newshelf will comprise individuals. CWEP is a private equity
investor.
[4]
Of relevance to the competition assessment is CWEP’s current
32% shareholding in Pronto Holdings (Pty) Ltd (“Pronto”),
which is involved in the manufacture and sale of ready-mix concrete
used in construction and also in the processing and sale of
fly ash
which is used as a partial cement replacement when making concrete or
cement products. Pronto operates in Gauteng.
1
The Competition Commission (“Commission”) determined that
this shareholding gives CWEP “negative” control
over
Pronto.
2
Of further relevance is CWEP’s interest in the Rhodes Food
Group (“Rhodes”), which is involved in food production
and processing (see paragraph 17 below).
[5]
RMBV is a subsidiary of FirstRand Bank Limited, which is a
wholly-owned subsidiary of FirstRand Limited. The FirstRand Group’s
activities include retail, corporate, investment and merchant banking
and asset management.
Target
firms
[6]
The primary target firms are the (i) Technicrete; (ii) Ocon; and
(iii) Rocla businesses within the Construction Products Division
of
Murray & Roberts Ltd (collectively referred to as “the
target firms”). Murray & Roberts Ltd (“M&R”)
is a wholly-owned subsidiary of the Murray & Roberts Group.
[7]
The above-mentioned businesses are active in the following areas:
Technicrete
is a manufacturer of a range of cementitious products used mainly in
the mining, building and infrastructure industries.
It produces an
extensive range of concrete paving products and kerbs for heavy and
light- duty roads, pedestrian routes, retaining
wall systems, roof
tiles, advanced erosion protection systems, as well as mining
products. It has seven manufacturing facilities
located in the
Northern parts of South Africa.
Ocon
is a clay masonry brick manufacturer, producing products for
application in the brick industry. It manufactures and supplies
a
range of clay bricks and semi-faced clay bricks to construction and
property development companies and building contractors.
It supplies
its products predominantly in the Gauteng area.
Rocla
manufactures precast concrete infrastructural products such as storm
water products, sewer products, poles, road barriers
and high
security walls. It is active throughout South Africa.
Proposed
transaction
[8]
In terms of the proposed transaction, Newsheif intends to, through
three crossconditional and interrelated
Sale
of Business Agreements
,
acquire the target businesses.
3
[9]
CWEP has identified each of the target businesses as attractive
opportunities that offer good growth potential. RMBV, in its
capacity
as a financial investor, seeks to generate a return through its
investment in each of the target businesses.
[10]
The proposed transaction is aligned with M&R’s goals.
Relevant
market and impact on competition
Horizontal
assessment
[11]
The Commission found that there is no product overlap between the
activities of the broader acquiring group (including Newshelf,
the
FirstRand Group and CWEP) and the target firms.
Vertical
assessment
[12]
Two levels of vertical relationships arise from the proposed
transaction given CWEP's current interest in Pronto.
[13]
The first vertical relationship arises as a result of Pronto (through
its subsidiary Ulula Ash (Pty) Ltd (“Ulula”))
supplying
fly ash to Rocla (see paragraph 7 above). The second vertical
relationship arises as a result of Ulula supplying fly
ash to
Technicrete, to use during its manufacturing processes of building,
infrastructural and mining products. Fly ash is a by-product
of
powdered coal combustion in the power generation industry and is used
as a cement extender.
[14]
The Commission however concluded that no input or customer
foreclosure will arise from this transaction in relation to these
vertical relationships.
[15]
According to the Commission and other local producers of fly ash,
Ulula’s estimated market share in a national market
for fly ash
is less than 20%.
4
The other players in fly ash production are Ash Resources and Sephaku
Ash. Ash Resources is the largest of these players.
5
Ulula therefore is unlikely to have market power in the upstream
market. Furthermore, Rocla purchases limited levels of Ulula’s
total fly ash sales.
6
In addition to this, Ulula only supplies a small percentage of its
total fly ash sales to Technicrete.
7
The Commission further noted that fly ash is generally used in a
number of applications that involve cement related products, which
stretch beyond the activities of Rocla and Technicrete.
8
We further note that competitors did not raise any input foreclosure
concerns.
[16]
According to the Commission, both Rocla and Technicrete have a number
of competitors in the downstream markets. For Rocla these
competitors
include Aveng/Infraset, Cobro Concrete, Vula Engineering Services and
Salberg Concrete Products
9
and for Technicrete these competitors include CLP, Aveng/Infraset and
Apollo.
10
Coordination
[17]
Given past cartel conduct in the market for concrete based products
such as that manufactured by Rocla, the Commission assessed
if the
proposed transaction was likely to enhance or facilitate coordination
in any market. The Commission further indicated that
Rhodes (see
paragraph 4 above) is implicated in a cartel investigation related to
the exporting of fresh fruits.
11
The Commission however concluded that because M&R was disposing
of the target businesses to companies that are not active in
the same
markets, the proposed transaction would not likely facilitate
collusion. Furthermore, Rhodes operates in different markets
than the
target firms. During the Tribunal hearing the merging parties also
indicated that Rocla’s involvement in the above-mentioned
cartel investigation conducted by the Commission was as a leniency
(CLP) applicant.
12
Conciusion
[18]
We conclude that that the proposed transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
Public
interest
[19]
The proposed transaction will have no adverse effect on employment
13
and does not raise any other public interest concerns.
CONCLUSION
[20]
We
approve the merger unconditionally.
Andreas
Wessels
20
September 2013
DATE
Anton
Roskam and Imraan Valodia concurring
Tribunal
Researcher: Caroline Sserufusa
For
the acquiring firms: Mark Garden of Edward Nathan Sonnenbergs
For
the target firms: Rudolph Labuschagne of Bowman Gilfillan
For
the Commission: Reabetswe Molotsi
1
See
merger record, page 65.
2
Confirmed
by the merging parties, see transcript of hearing, pages 10 and 11.
3
See
merger record,
inter
alia
pages 81 and 86 to 91.
4
See
Commission’s Report, page 19.
5
Also
see transcript of hearing, page 3
6
See
Commission’s Report, page 20.
7
See
Commission’s Report, page 22.
8
See
Commission’s Report, page 21..
9
See
Commission’s Report, pages 20 and 21, Also see merger record
page 76.
10
See
Commission’s Report, page 22. Also see merger record page 73.
11
Commission's
Report, page 23.
12
See
transcript of hearing, pages 5 and 9.
13
See
pages 18, 82, 101 and 102 of the merger record.