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[2014] ZACT 43
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MacNeil (Pty) Ltd v Brands 4 Africa Distribution and Logistics (Pty) Ltd (018150) [2014] ZACT 43 (12 March 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case No: 018150
In the matter between:
MacNeil (Pty)
Ltd
Acquiring
Firm
And
Brands 4 Africa
Distribution and Logistics (Pty)
Ltd
Target
Firm
Panel: Anton
Roskam (Presiding Member)
Medi
Mokuena (Tribunal Member)
Merle
Holden (Tribunal Member)
Headr
on: 12
February 2014
Order issued
on: 12
February 2014
Reasons issued
on: 12
March 2014
Reasons for Decision
Approval
1.
On 12 February 2014 the Competition Tribunal (the “Tribunal”)
unconditionally approved an acquisition by MacNeil (Pty)
Ltd
(“MacNeil”) of Brands 4 Africa Distribution and Logistics
(Pty) Ltd (“Brands 4 Africa”).
2.
The reasons for the approval of the proposed transaction
follow.
The Parties and
their activities
3.
The
primary acquiring firm is MacNeil, a private company incorporated in
accordance with the laws of the Republic of South Africa.
MacNeil is
controlled by Aptopart (Pty) Ltd (“Aptopart”), which is
in turn controlled by Humulani Investments (Pty)
Ltd (“Humulani
Investments”). Humulani Investments is controlled by invicta
Holdings Ltd (“invicta”), a
public company listed on the
Johannesburg Securities Exchange. Invicta is not controlled by any
firm. The following entities hold
more than 5% shareholding in
Invicta: Titan Shareholders (22.65%), Dorsland Diamante (Pty) Ltd
(13.39%) and The Sherrell Family
Trust (8.35%). MacNeil controls a
number of firms.
[1]
4.
MacNeil is a wholesale supplier of sanitary ware, brass ware,
taps, plumbing fixtures, plastic piping and related products to the
building material sector of South Africa and neighbouring countries.
Its products include inter alia, taps, baths, showers, sanitary
ware,
accessories, water saving equipment, plastics, sinks, geysers and
copper tubing.
5.
The primary target firm is Brand 4 Africa, a private company
incorporated in accordance with the laws of the Republic of South
Africa.
Brands 4 Africa is 80% controlled by the Bowl Share Trust and
the remaining 20% is held by Kevin Herbert. Brands 4 Africa controls
Lodge Stock and Barrel (Pty) Ltd (LSAB”) and One Owl Enterprise
(Pty) Ltd (“One Owl”).
6.
Brands 4 Africa through its subsidiaries is a distributor of
various commodities primarily sourced in Southern Africa, and
subsequently
exported to Zimbabwe, Botswana, Zambia and Mozambique.
The majority of products procured and distributed by Brands 4 Africa
comprise
of building supplies, hardware and related products. Brands
4 Africa owns a 5 truck fleet which offer logistical and transport
services to customers for goods sourced in South Africa, but for sale
in Botswana, Zambia, Zimbabwe and Mozambique.
Proposed
transaction and rationale
7.
MacNeil intends to acquire 60% of the issued ordinary share
capital and 60% of all shareholder claims on loan account against
Brands
4 Africa Brands 4 Africa. On completion of the proposed
transaction, MacNeil will control Brand 4 Africa.
8.
The Invicta Group submitted that it sees the proposed
transaction as an opportunity to expand its African footprint.
9.
The shareholders of Brands 4 Africa submitted that Brands 4
Africa will benefit from being part of a broader acquiring group as
it will, inter alia, have additional access to funding.
Competition
Analysis
10.
The Commission identified a horizontal overlap in
the activities of the merging parties in respect of the market for
the wholesale distribution of building supplies, hardware and related
products. In respect of the geographic market, the Commission
found
that Brands 4 Africa distributes its products in the following
regions: North West, Gauteng, Kwa-Zulu Natal, Western Cape
and
Limpopo Provinces. MacNeil, however, distributes its products
nationally.
11.
The Commission was informed by competitors of the merging
parties that transport costs constitute an insignificant amount to
the
value of the actual product and that customers of the merging
parties purchase on a national level. Given these facts, the
Commission
defined the relevant geographic market as national. The
Commission found that the merging parties’ postmarket
share
in respect of the market for the wholesale distribution of
building supplies, hardware and related products is approximately 5%.
Competitors of the merging parties include Matus, Dawn Group, L&G
Tools, Topline Tools and others.
12.
The Commission also found that there is a vertical
relationship in the activities of the merging parties in that Brands
4 Africa owns 5 trucks which offer logistical and transport services
and MacNeil is a wholesale distributor of building supplies,
hardware
and related products (and outsources the majority of its logistic
requirements to independent logistical companies). The
Commission
found that there are several independent logistics and transport
service providers that provide their services to wholesale
distributors such as PX, GG Heavy Haulage, Freight Co-ordination
Services, Big Foot, Time Freight and others. The Commission therefore
concluded that the proposed transaction is unlikely to result in
input foreclosure concerns.
13.
The Commission considered whether customer foreclosure
could possibly arise in the market for the wholesale distribution of
building supplies, hardware and related products. In this regard, the
Commission concluded that the merging parties’ post-merger
market share in this market is low and there are a number of
wholesale distributors that would constrain the merged entity
post-merger.
Public interest
14.
The
merging parties confirmed that the proposed transaction will have no
adverse effect on employment and will not result in any
retrenchments
in South Africa.
[2]
The proposed transaction raises no other public interest concerns.
Conclusion
15.
For the reasons mentioned above, we approve the proposed
transaction unconditionally.
12 March 2014
Date
Mrs. Medi
Mokuena
Mr. Anton Roskam and
Professor Merle Holden concurring
Tribunal
researcher: Ipeleng Selaledi
For
the merging parties: Rick van Rensburg of Edward Nathan Sonnenbergs
For
the Commission: Xolela Nokele
[1]
See pages 7 and 8 for a list of MacNeil’s subsidiaries.
[2]
See merger record, page 13. Also see paragraph 7.1 of the
Commission’s merger report.