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[2014] ZACT 13
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Imperial Holdings Limited v Pharmed Pharmaceuticals (Pty) Ltd (018887) [2014] ZACT 13 (31 July 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 018887
DATE:
31 JULY 2014
In
the matter between:
IMPERIAL
HOLDINGS
LIMITED
...................................................
Primary
Acquiring Firm(s)
And
PHARMED
PHARMACEUTICALS (PTY) LTD
.....................................
Primary
Target Firm(s)
Panel
: Yasmin Carrim (Presiding Member)
:
Takalani Madima (Tribunal Member)
:
Andiswa Ndoni (Tribunal Member)
Heard
on : 09 July 2014
Order
Issued on : 09 July 2014
Reasons
Issued on : 31 July 2014
Reasons
for Decision
Approval
[1]
On
09 July 2014 the Competition Tribunal (“the Tribunal”)
unconditionally approved an acquisition by Imperial Holdings
Limited
(“Imperial”) of Pharmed Pharmaceuticals (Pty) Ltd.
[2]
The
reasons for unconditionally approving the transaction follow
hereunder.
Parties
to the Transaction
Primary
acquiring firm
[3]
The
primary acquiring firm is Imperial, a public company listed on the
Johannesburg Securities exchange and, as such, not controlled,
either
directly or indirectly, by any other firm. Imperial comprises the
Imperial Group which is a diversified industrial services
and retail
group with interests in,
inter
alia,
transportation, logistics, car rental, tourism and financial
services.
[4]
For
the purposes of the proposed transaction, it is necessary to note
that Imperial’s activities in the logistics sector include:
•
Pharmaceutical
supply chain management which it conducts through Imperial Health
Sciences; and
•
Courier
and express services which it conducts through EWC Express, Express
Hauliers and King Transport.
Primary
target firm
[5]
The
primary target firm is Pharmed Pharmaceuticals (“Pharmed”),
a private company incorporated in terms of the laws
of the Republic
and not controlled by any individual or firm. Pharmed is a
pharmaceutical wholesaler carrying a diverse array of
medical
products. Pharmed sources either directly from manufacturers or from
pharmaceutical distributors and on-sells to retailers,
pharmacies,
doctors and hospitals.
[6]
To
a lesser extent, Pharmed is also active in the provision of courier
and express services through a subsidiary, Virtual Logistics.
Proposed
Transaction
[7]
The
proposed transaction involves Imperial acquiring between 62% and 76%
of the issued share capital in Pharmed with 43% thereof
being
acquired from Lenmed Health Proprietary Limited (“Lenmed”)
and the remainder from
minority
shareholders. The transaction involves Lenmed exiting Pharmed
entirely such that Pharmed is held by Imperial, as to between
62% and
76%, and the remaining minority shareholders, as to between 24% and
38%.
Rationale
[8]
Imperial
Logistics’ high-level strategy is to integrate distribution and
wholesale services. Further, Imperial submits that
it has identified
opportunities in the healthcare sector and aims to establish a
“
focused,
integrated
,
specialised
and independent healthcare supply chain business
.”
[9]
From
Pharmed’s perspective, numerous large retailers having recently
entered the pharmaceuticals and wholesaling markets has
impacted
negatively on regional independent wholesalers like itself. Further,
it appears that in order to remain competitive, considerable
consolidation is required.
Relevant
Market and Impact on Competition
[10]
The
relevant product markets identified by the Commission are as follows:
1.
The
market for the wholesale distribution of pharmaceutical products; and
2.
The
market for the provision of courier and express services.
The
geographic market of both these product markets was deemed to be
national.
Wholesale
distribution market
[11]
Within
the national market for the wholesale distribution of pharmaceutical
products, the Commission found that post-merger, Imperial
will hold a
market share of below 5% with the transaction accounting for
accretion of below 4%.
[I]
The Commission’s investigation also revealed that the merged
entity will continue to face competition from large players
in the
market such as UPD,
UTi
Pharma and Alphapharm who hold considerable estimated market shares.
[12]
Further,
and similarly in mitigation of any competition concerns, the
customers of wholesale distributors in this market are generally
large pharmaceutical manufacturers who, due to their sheer size,
wield extensive countervailing power and will pose a considerable
constraint over the merged entity.
Provision
of courier and express services market
[13]
In
the national market for the provision of courier and express services
the Commission found that the merged entity would hold
a market share
of between 2.5% and 7% with accretion being minimal at below 0.1%. In
addition to this minimal accretion the Commission
found that the
merged entity would face stiff competition from large players such as
DHL, FedEx and UTi Sun Couriers.
[14]
The
courier services market was found to be highly fragmented with prices
being largely transparent. Further, customers appear to
be price
sensitive and readily shift their business.
[15]
In
light of the aforegoing, the Commission concluded that the proposed
transaction is unlikely to substantially lessen competition
in the
markets defined above and proposed that we approve the transaction
unconditionally.
Public
Interest
[16]
The
Commission identified no public interest concerns likely to arise
from the proposed transaction.
Conclusion
[17]
We
conclude that the proposed transaction is unlikely to substantially
prevent or lessen competition in the relevant markets nor
does the
merger raise any
public
interest concerns that would alter that conclusion. Accordingly, we
approve the transaction unconditionally.
31
July 2014 DATE
Ms
Yasmin Carrim
Dr
Takafani Madima and Ms Andiswa Ndoni concurring.
Tribunal
Researcher: Shannon Quinn
For
the merging parties: Helen Fotakis- Tugendhaft Wapnick Banchetti For
the Commission: Mogau Aphane
[I]
These market share and accretion figures are based on estimated
revenue figures for the 2013 year.