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[2013] ZACT 112
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Grindrod Holdings South Africa (Pty) Ltd v RACEC Group Ltd (017699) [2013] ZACT 112 (12 November 2013)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No.:
017699
In the matter
between
Grindrod
Holdings South Africa (Pty)
Ltd
Acquiring
Firm
And
RACEC Group
Limited
Target
Firm
Panel
:
Norman Manoim (Presiding Member)
Andreas
Wessels (Tribunal Member)
Medi
Mokuena (Tribunal Member)
Heard
on
: 09 October
2013, with last submission received on 15 October 2013
Order
issued on :
15
October
2013
Reasons
issued on :
12 November 2013
Decision
Approval
[1]
On 15 October 2013, the Competition
Tribunal (“Tribunal”) unconditionally approved the
proposed transaction involving
Grindrod Holdings South Africa (Pty)
Ltd (“Grindrod”) and RACEC Group Limited (“RACEC”).
[2]
The reasons for approving the proposed
transaction follow.
Parties to
transaction
[3]
The primary acquiring firm is Grindrod.
Grindrod is a wholly owned subsidiary of Grindrod Freight Services
(Pty) Ltd, which in turn
is a wholly owned subsidiary of Grindrod
Limited. Grindrod Limited is a public company listed on the
Johannesburg Stock Exchange
Limited (“JSE”).
[4]
The Grindrod Group is primarily active
in the market for the provision of freight and logistics services. In
particular, the Grindrod
Group specialises in moving bulk dry
commodities, bulk liquid commodities, containerised cargo and
vehicles by road, rail, sea
and air on a global basis. Of relevance
to the competition assessment of the proposed transaction are the
rail solutions offered
by the Freight Services Division of the
Grindrod Group. The rail operations conducted by the Grindrod Group
relate to (i) the manufacture,
lease, refurbishment and maintenance
of locomotives and rolling stock; (ii) transportation services, as
mentioned above; (in) rail
safety and specialised signalling
services; and (iv) the provision of management services ancillary to
its locomotive, rolling
stock and transportation activities.
[5]
The primary target firm is RACEC, a
public company listed on the JSE.
[6]
RACEC is active in rail construction,
rail electrification and rail maintenance contracting. In other words
it provides services
related to the actual railway track
infrastructure.
Proposed
transaction and rationale
[7]
In terms of the proposed transaction
Grindrod will acquire 74.9% of the issued ordinary share capital of
RACEC. The remainder of
the shares will remain under the retention of
Solethu Civils Holdings (Pty) Ltd. Post merger, Grindrod will have
sole control over
RACEC.
[8]
Grindrod submitted that the proposed
transaction would complement its current service offering and present
synergies in respect
of track maintenance and signalling services.
[9]
RACEC submitted that the proposed
transaction will inter alia create synergies and generate
efficiencies as a result of RACEC falling
within the broader Grindrod
Group post-merger.
Competition
assessment
[10]
The Competition Commission
(‘'Commission”) found no horizontal overlap between the
activities of the merging parties.
The Commission however found that
the proposed transaction gives rise to two vertical overlaps.
[11]
The first vertical dimension arises as a
result of Grindrod Bank Limited (a subsidiary within the Grindrod
Group) providing financing
to the RACEC Group. This vertical
relationship is unlikely to raise foreclosure concerns given the
number of players in the vertically
affected markets and we do not
discuss this issue in any further detail.
[12]
The second vertical dimension arises as
a result of RACEC maintaining the Matola Coal terminal in Mozambique
for the Grindrod Group.
The Commission concluded that this does not
raise any economic effects in South Africa.
[13]
Given
the merging parties’ claimed synergies and efficiencies
resulting from the proposed merger (see paragraphs 8 and 9 above),
the Tribunal questioned the merging parties regarding potential
bundling of their services post-merger.
[1]
Furthermore, during the hearing it transpired that the Commission did
not consult Transnet Freight Rail (“Transnet’’),
a
customer of both merging parties
[2]
,
in relation to the potential competition effects of the proposed
transaction. The Tribunal therefore directed the Commission to
obtain
Transnet’s views with regards to the competition effects of the
proposed merger.
[3]
[14]
A
representative of the merging parties at the hearing indicated that
in his experience customers of the relevant services provided
by each
of the merging parties issue separate tenders for these services.
This was also confirmed in the tender data submitted
by Transnet.
After consultation, Transnet confirmed that it in principle had no
objections to the proposed merger.
[4]
[15]
We have no reason to doubt the
Commission’s findings and conclude that the proposed
transaction does not substantially prevent
or limit competition in
the affected markets.
Public
interest
[16]
The
merging parties confirmed that the proposed transaction will have no
adverse effects on employment.
[5]
The proposed transaction raises no other public interest concerns.
Conclusion
[17]
We approve the proposed transaction
unconditionally.
12
November 2013
DATE
Andreas
Wessels
Norman Manoim
and Medi Mokuena concurring
Tribunal
Researcher: Caroline Sserufusa
For the merging
parties: R van Rensburg of Edward Nathan Sonnenbergs Inc.
For the
Commission: Reabetswe Molotsi
[1]
See transcript of hearing, pages 4 to 9.
[2]
Transnet is a heavy haul freight rail company that specialises in
the transportation of freight and owns and maintains an extensive
rail network across South Africa.
[3]
See transcript of hearing, pages 6, 7, 9 and 10.
[4]
See Transnet’s submission of 15 October 2013.
[5]
See merger record pages 11, 41 and 52.