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[2014] ZACT 106
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Imperial Holdings Limited v Pharmed Pharmaceuticals (Pty) Ltd (018887) [2014] ZACT 106 (31 July 2014)
COMPETITION TRIBUNAL OF
SOUTH AFRICA
Case No: 018887
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 lmperial'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%.
[1]
The Commission's investigation also revealed that the merged entity
will continue to face competition from large players in the
market
such as UPD, 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 OHL, 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 approve the transaction
unconditionally.
Ms
Yasmin Carrim
Dr
Takalani Madima and Ms Andiswa Ndoni concurring.
31 July 2014
DATE
Tribunal
Researcher:
Shannon Quinn
For
the merging parties: Helen Fotakis- Tugendhaft
Wapnick Banchetti
For
the Commission: Mogau
Aphane
[1]
These market share and accretion figures are based on estimated
revenue figures for the 2013 year.