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[2014] ZACT 45
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Super Group Holdings (Pty) Ltd v Great Wall Motors SA (Pty) Ltd (018234) [2014] ZACT 45; [2014] 1 CPLR 138 (CT) (12 March 2014)
COMPETITION TRIBUNAL
OF SOUTH AFRICA
Case No: 018234
In
the matter between:
SUPER
GROUP HOLDINGS (PTY)
LTD
Primary Acquiring Firm
And
GREAT
WALL MOTORS SA (PTY)
LTD
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
:
Medi Mokuena (Tribunal Member)
:
Takalani Madima (Tribunal Member)
Heard
on
: 5 March 2014
Order Issued on
: 5 March 2014
Decided
on
:12
March 2014
Reasons for Decision
Approval
[1]
On 5 March 2014, The Competition Tribunal unconditionally
approved the acquisition by Super Group Holdings (Pty) Ltd of a 50.1%
shareholding in Great Wall Motors SA (Pty) Ltd.
[2]
The reasons for approving the proposed transaction follow.
Parties to
transaction
Primary acquiring
firm
[3]
The
primary acquiring firm is Super Group Holdings (Pty) Ltd (“Super
Group”). Super Group is controlled by Super Group
Limited
(79.96%) and by SG Tsogo (RF) (Pty) Ltd (20.04%). Super Group Limited
is a public company listed on the Johannesburg Securities
Exchange
and its main shareholders are
[1]
:
•
Allan Gray PIC
[2]
•
Visio/Mazi Capital
(Hedge funds)
•
PSG Online
Securities Broking
•
Investec Asset
Management
[4]
Super Group controls the following firms:
•
Super Group Africa
•
Chataprop Holdings
68 (Pty) Ltd
•
Lexshell 280
Investments (Pty) Ltd
•
Micor Freight
(Pty) Ltd
•
Rentrack (Pty) Ltd
[5]
Super Group is a supply chain management business with
operations in South Africa, Australia, New Zealand, Mozambique,
Zimbabwe,
Botswana, Namibia, Malawi, Nigeria, the Democratic Republic
of Congo and the United Kingdom. The business consists of the
planning
and management of all activities across the supply chain,
including the sourcing, procurement, transport and warehousing of
goods
and services. This is done through coordination and
collaboration with certain suppliers, intermediaries, third party
service
providers or customers.
Primary target firm
[6]
The primary target firm is Great Wall Motors SA (Pty) Ltd
(“GWMSA”), a private company which wholly owns Jinbei SA
(Pty)
Ltd and a 50% share in Orion Properties 85 (Pty) Ltd. The
remaining shares in Orion Properties 85 (Pty) Ltd are held by Peter
Azzi
Trust (25%) and Henry Meistre (25%).
[7]
GWMSA is controlled by Mr Anthony Pinfold (96%) in his
personal capacity and through nominee companies, Pop-Up Trading 39
(Pty)
Ltd and Tarsa Trading LLC (“Tarsa”). Williams Sykes
controls the remaining 4% in GWMSA.
[8]
GWMSA imports and distributes passenger vehicles, light
commercial vehicles and related spare parts from Great Wall Motors,
China.
GWM China does not own GWMSA; the only relationship between
the two companies is that GWMSA is a local exclusive distributor of
vehicles manufactured by GWM China in China.
Proposed
Transaction and Rationale
[9]
In terms of the Agreement between Super Group, Pop-Up Trading
39 (Pty) Ltd, Zustonelli and Mr Pinfold, it is agreed that Super
Group
will acquire 50.1 % of the total issued shares in GWSA from
Pinfold in two phases.
[11]
Following implementation of the proposed transaction, Super
Group will acquire sole control over GWMSA even though it will
acquire
50.1%.
[12]
Super Group’s rationale for the acquisition is that it
has recently acquired two GWMSA dealerships and sees the transaction
as an opportunity to backward integrate in the motor vehicle supply
chain by acquiring an importer. For Mr Pinfold it is an opportunity
to realise part of his investment in GWMSA and as such, wishes to
sell 50.1% of the shares ultimately held by him to a large investor
such as Super Group.
Relevant
Market and Impact on Competition
[13]
There
is no horizontal relationship between the activities of the merging
parties. The proposed transaction does however give rise
to a
vertical overlap in the activities of the merging parties in that
Super Group owns dealerships which sell new and used passenger
and
commercial vehicles and spare parts while GWMSA and Jinbei import and
distribute new passenger and commercial vehicles. Thus,
in line with
our previous decisions,
[3]
we define the relevant market as:
•
The import and
supply of passenger and light commercial vehicles nationally; and
•
The retail of new
passenger and light commercial vehicles in the Midrand and Boksburg
area.
[14]
In October 2013, Super Group acquired two GWM branded
dealerships in Boksburg and Midrand. GWMSA’s sales to the
dealerships
owned by Super Group account for a relatively small
proportion of GWMSA’s turnover. As part of the conditions under
the proposed
merger, Super Group has undertaken to open and/or
acquire a minimum of 5 other GWM branded dealerships within a period
of 18 months
from the date of implementation of the transaction.
[15]
The Commission, during its investigation, contacted customers
of GWMSA and the independent dealerships. Two of these dealers raised
concerns that Super Group would post merger use its position as an
importer to favour its dealerships over those of rivals. The
Gommission considered this issue during its investigation as did the
Tribunal during its hearing. The answer provided by Super
Group was
that it was not in its interest to foreclose other dealers as it was
in their interests to expand distribution of GWM
vehicles. Regardless
of the number of GWM dealerships that Super Group opens and/or
acquires, a significant proportion of GWMSA’s
turnover is still
derived from the more than 70 other independent dealerships.
[16]
We therefore find that the proposed transaction is unlikely to
raise input foreclosure concerns as Super Group does not seem to have
an incentive to reduce sales to independent dealerships, post-merger.
In addition, the independent dealerships are an essential
channel for
GWMSA to grow their sales and therefore increase market share.
[17]
Furthermore
even if the transaction leads to foreclosure of other GWM dealers
this would only impact on intra brand competition.
In respect of
inter brand competition the market in which GWMSA competes is highly
competitive and fragmented with a number of
suppliers manufacturing
vehicles locally or exporting into South Africa.
[4]
Jinbei
[18]
Jinbei SA does not currently supply minibus taxis (or any
other vehicles) to Super Group. However, we hold the view that even
if
Jinbei were to supply their vehicles exclusively to Super Group
post-merger, that Super Group’s competitors will still have
access to other alternative options, including Toyota and Volkswagen.
Conclusion
[19]
In light of the above we concluded that the proposed
transactions are unlikely to substantially prevent or lessen
competition in
the market of sale of motor vehicles. In addition, no
public interest issues arise from the proposed transactions.
Accordingly
we approved the proposed transactions unconditionally.
12 March 2014
DATE
Norman
Manoim
Medi Mokuena and
DrTakalani Madima concurring
Tribunal
Researcher: Moleboheng Moleko
For
the merging parties: Fluxmans Attorneys
For
the Commission: Nompucuko Nontombana
[1]
See page 7 of the Commission’s Report.
[2]
PIC also has interests in Barloworld SA, Imperial Holdings, Bidvest
(McCarthy), Combined Motor Holdings and Unitrans Automotive.
[3]
See Imperial and Renault case no. 017582.
[4]
Examples of brands that are being imported into South Africa in a
fully built up state by region are: Europe (Peugeot and Citroen),
Japan (Daihatsu, Honda, Subaru, Korean (Daewoo, Hyundai and Kia),
Indian (Tata, Mahindra) and China (Chery, Chana and Foton).