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[2014] ZACT 16
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Friedshelf 1508 (Pty) Ltd v RTT Holdings (Pty) Ltd (018739) [2014] ZACT 16 (24 July 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018739
DATE:
24 JULY 2014
In the matter
between:
Friedshelf
1508 (Pty)
Ltd
................................................
Acquiring
Firm
And
RTT
Holdings (Pty)
Ltd
......................................................
Target
Firm
Panel
Takalani Madima (Presiding Member)
Anton
Roskam (Tribunal Member)
.
Fiona Tregenna (Tribunal Member)
Heard on 25
June 2014
Order
issued on : 25 June 2014 Reasons issued on : 24 July 2014
Reasons
for Decision
Approval
1.
On 25 June 2014 the Competition Tribunal (the ‘Tribunal”)
approved an acquisition by Friedshelf 1508 (Pty) Ltd (“Friedshelf’)
of RTT Holdings (Pty) Ltd (“RTT”) with conditions.
2.
The reasons for the approval of the proposed transaction follow
hereunder.
The
Parties and their activities
3.
The primary acquiring firm is Friedshelf. Friedshelf is jointly
controlled by
Ethos
Fund V1 (“Ethos Fund VI”), African Development Partners
II L.P (“ADP II”) and the Government Employees
Pension
Fund (“GEPF”) (represented by the Public Investment
Corporation Ltd (the “PIC”).
4.
Friedshelf is a newly incorporated acquisition vehicle and has no
operations or business activities. Ethos Fund VI is a private
equity
investment fund which focuses on control acquisitions and growth
capital in medium to large companies in South Africa. ADP
II is a
diversified pan- African portfolio of private equity investments in
established and growing companies. The GEPF (managed
by the PIC) has
interests in various portfolio companies and its assets are invested
in classes including equities, fixed interest
instruments, money
market instruments etc.
5.
The primary target firm is RTT. RTT is jointly controlled by RMB
Investments and Advisory (Pty) Ltd (“RMB”) Investments
and RMB Ventures Six (Pty) Ltd (“RMB Ventures”). RMB and
RMB Ventures are ultimately controlled by FirstRand Ltd
(“FirstRand”).
6.
The RTT Group is a logistics company that provides innovative,
IT-driven solutions, secure transportation, warehousing, distribution
and other value added services on a fully integrated basis, rjt’s
services are provided to several key industrial sectors
in South
Africa including telecoms and technology, fashion and lifestyle,
automotive, healthcare, beauty and retail.
Proposed
transaction and rationale
7.
In this proposed transaction Friedshelf intends to acquire 100% of
the entire issued share capital of RTT. On completion, RTT
will be
solely controlled by Friedshelf.
8.
The rationale for Friedshelf is that it considers RTT to be an
attractive investment opportunity as RTT is
inter
alia
a leading independent logistics provider, has a stable
customer base and has good growth initiatives.
9.
RTT submitted that its current shareholders have reached the end of
their investment cycle and this transaction provides these
shareholders with an opportunity to extract value from their
investment in RTT.
Competition
Analysis
10.
The Commission found that there is no horizontal overlap in the
activities of the merging parties as the acquiring firm is newly
incorporated and has no operations or business activities. There is
also no horizontal overlap between the companies that control
the
acquiring firm and the RTT Group.
11.
The Commission, however, identified a vertical relationship between
the parties as Airports Company South Africa (“ACSA”),
in
which the GEPF/PIC has a controlling interest, owns the land on which
RTT’s head office is located. The Commission found
that this
relationship does not result in any input or customer foreclosure
concerns in the property sector as ACSA is an insignificant
customer
for firms competing in this sector.
Information
sharing concerns
12.
The Commission found that certain portfolio companies in which the
GEPF (represented by the PIC) has non-controlling interests
operate
in the broader logistics industry and that these companies are
competitors of RTT in this market. Although the interests
are
non-controlling, the Commission has established that the GEPF/PIC has
the right to appoint directors to the boards of the non-controlling
companies. Since the PIC will be entitled to appoint a director to
the board of RTT in the present transaction, the Commission
was
concerned that this structure could allow for the sharing of
competitively sensitive information.
13.
In order to deal with this concern, the Commission and the merging
parties agreed on conditions which would ensure that the
director
appointed to the RTT board will not be appointed to the boards of the
non-controiling portfolio companies.
South
Africa.
[I]
The proposed transaction raises no other public interest concerns.
Conclusion
15. For the
reasons mentioned above, I approve the proposed transaction subject
to conditions attached hereto marked as “Annexure
A”.
Date
24 July 2014
Dr.
Takalani Madima
Mr.
Anton Roskam and Professor Fiona Tregenna concurring
Tribunal
researcher: Ipeleng Selaledi
For
the merging parties: Rick van Rensburg of Edward Nathan Sonnenbergs
For the Commission: Thelani Luthuli
Annex
ure A
Friedshelf
1503 Proprietary Limited And
RTT
Holdings Proprietary Limited CC CASE NUMBER: 2G14Mar0118
CONDITIONS
1.
Definitions
The
following expressions shall bear the meanings assigned to them below
and cognate expressions
bear
corresponding meanings -
1.1
“Acquiring Firm” means Friedshelf;
1.2
"Approval Date
1
' means the date referred to in the
Competition Tribunal Order;
1.3
“Commercial reasons* mean reasonable principles of commerce, or
bona fide reasons, taken into account in arriving at a
decision in
the ordinary course of business;
1.4
"Commission" means the Competition Commission of South
Africa;
1.5
“Competitively Sensitive Information” includes the
following categories of competitively sensitive information,
namely
non-public pricing information, customer details including any
discounts and rebates provided to customers, any planned
price
increases, price reduction or promotions, margin information,
information on specific clients and client strategies including,
but
not limited to financial data including non-public sales volume, and
sales value, marketing, promotional and advertising strategies,
and
budget and business models or plans;
1.6
"Conditions"means these condit i on s;
1
J
"Effective Date" means midnight on the last business day of
the month in which the last of the Conditions Precedent as
set out in
the Subscription, Repurchase and Sale of Shares Agreement entered
into between the Merging Parties is fulfilled;
1.8
“Friedshelf
7
means Friedshelf 1508 Proprietary
Limited;
1.9
“GEPF” means Government Employee Pension Fund;
1.10
"Merger" means the acquisition of control by Friedshelf
over RTT;
1.11
11
Merging Parties" means Frieds he If and RTT;
1.12
“Non-Controlling Portfolio Companies” means Barloworld
Limited; Super Group Limited; Eqstra Limited; Trencor Limited;
Grindrad Limited and Imperial Holdings Limited;
1.13
“PIC” means Public Investment Corporation Limited;
1.14
“RTT’ means RTT Holdings Proprietary Limited; and
1.15
"Target Firm" means the RTT;
2.
Recordal
On
31 March 2014, the Merging Parties .filed this large merger
transaction with the Commission. Following its investigation of this
Merger transaction, the Commission is of the view that the Merger is
unlikely to substantially prevent or lessen competition in
any market
as no overlaps arise.
However,
the Commission is concerned that the PIC may have the right to
appoint a director to the board of each Non-Controlling
Portfolio
company and have recently exercised that right by appointing one
director, namely WhwgifewBBfflMk. to sit on the board
Through the
merger,
it could also appoint a director to the board of RTT. Therefore the
merger creates a structure of "cross directorships”
that
could allow for the sharing of Competitively Sensitive information.
The
“Chinese Wair policy put in place by the PIC may not be
effective in preventing the flow of competitively sensitive
information
and is also not legally enforceable. The Commission
therefore found it appropriate to recommend the; conditions contained
herein.
The Merging
Parties have also agreed to these conditions.
3.
Conditions to the approval of the Merger
3.1.
For as long as the GEPF / PIC can appoint a director to the board of
RTT:
3.1.1.
It shall ensure that the director appointed to the RTT board will not
be appointed to the boards of the Non-Controlling Portfolio
Companies;
3.12. It shall
ensure that its unlisted investment in RTT is housed in a different
division/department to its listed investments
in the Non-Controlling
Portfolio Companies, with adequate security and confidentiality
safeguards preventing the sharing of Competitively
Sensitive
Information.
Ascendis
Health Limited and Pharma Natufa Proprietary Limited Condftions
The
Non-Controlling Portfolio Companies investments shall continue to be
part of the PIC’s whereas the RTT investment shall
be part of
the kMwaJMpipnrtfolio:
and
3.1.3. It shall
ensure that any. RTT Competitively Sensitive Information is only
reported to the respective investment committee
in closed door
sessions and such information is aggregated.
4.
Monitoring of compliance with the conditions
4.1.
Friedshelf shall inform the Commission in writing of the Effective
Date, within 5 days of it becoming effective.
4.2.
The PIC shall Implement the conditions in 3.1.1 to 3.1.3 within 10
business days of the Effective date of the merger.
4.3.
As proof of compliance thereof, the PIC shall submit an affidavit by
its Chief Executive Officer or Chief Investment Officer
attesting to
compliance with 4.1 above within 3 days of it been effected.
4.4.
. Should the PIC dispose of its entire interest in RTT, it shall
inform the Commission of such
uiopwocn
y^iuiih tjv uajfa vi uui iwuviu iy o oait? ayi i 1I VI
if
ayi
CCi I i<5i ii.^ guui I imii ly ci
copy
of such agreement as proof thereof.
4.5.
An apparent breach by the Merging Parties of any of the Conditions
shall be dealt with in terms of Rule 39 of the Rules for
the Conduct
of Proceedings in the Commission.
4.6.
All
correspondence in relation to these Conditions shall be submitted to
the following email address;
merqerconditions@compcom.co.za
.
Ascendis
Heallh Limited and Pharma Natura Proprietary Limited Conditions
Page
3 of 3
[I]
See merger record, page 12. Also see paragraph 9 of the Commission’s
merger report.