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[2014] ZACT 92
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Grindrod Holdings South Africa (Pty) Limited v Sturrock Grindrod Maritime Holdings (Pty) Ltd, In Re: Grindrod Shipping South Africa v Unicorn Calulo Shipping Services (Pty) Ltd (019125) [2014] ZACT 92 (5 August 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 019125
In the matter
between
Grindrod Holdings
South Africa (Pty)
Limited
....................................................
Primary
Acquiring Firm
And
Sturrock Grindrod
Maritime Holdings (Pty)
Ltd
.......................................................
Primary
Target Firm
Case No: 019117
And
the matter between
Grindrod Shipping
South
Africa
.............................................................................
Primary
Acquiring Frim
And
Unicorn Calulo
Shipping Services (Pty)
Ltd
................................................................
Primary
Target Firm
Panel: Norman Manoim
(Presiding Member)
Takalani Madima
(Tribunal Member)
Anton Roskam
(Tribunal Member)
Heard on: 24 July
2014
Order issued on: 24
July 2013
Reasons issued on :
05 August 2014
Reasons for
Decision
Approval
[1] On 24 July 2014
the Competition Tribunal (“Tribunal”) unconditionally
approved the two large mergers between Grindrod
Holdings South Africa
(Pty) Limited (“GHSA”) and Sturrock Grindrod Maritime
Holdings (Pty) Ltd (“Sturrock”),
and Grindrod Shipping SA
(Pty) Ltd(“GSSA”) and Unicorn Calulo Shipping Services
(Pty) Ltd(“Unical Shipping”).
[2] The reasons for
approving the proposed transactions follow.
Parties to
transaction
[3] The primary
acquiring firms are GHSA and GSSA, which are wholly-owned
subsidiaries of Grindrod Limited (“Grindrod”).
Grindrod
is a public company listed on the Johannesburg Securities Exchange
Limited (“JSE”) and is not controlled by
any firm.
Grindrod and its subsidiaries are active in the market for the
provision of freight and logistics services, specialising
in the
moving of bulk dry and liquid commodities, containerised cargo and
vehicles by rail, sea and air.
[4] The primary
target firms are Sturrock and Unicai Shipping. Sturrock is jointly
controlled by GHSA and Calulo Investments Proprietary
Limited
(“Calulo”), whilst Unicai Shipping is jointly owned by
GSSA and Caiuio. Unicaf Shipping is active in the market
for the
provision of bunker deliveries and petrochemical coastal shipping.
Unicai Shipping has two bunker divisions, one operating
at the Durban
port and the other operating at the Cape Town port.
[5] Sturrock on the
other hand is mainly responsible for offering ships agencies and
support services. This includes services across
dry and wet bulk as
well as linear agency fields to several well established brands.
Sturrock also offers agency, procurement and
product supply across a
wide spectrum of marine activities with an extensive geographic
spread to ship owners, operators and charters.
Proposed
transactions and rationale
[6] The Merging
Parties have described both proposed transactions as forming part of
an internal restructuring of Grindrod, through
which Grindrod will
purchase the remainder of shares in both target firms from its Black
Empowerment partners (“BEE”)
who will in turn receive as
payment equity at a holding company level. As such, post-merger,
Grindrod will have sole control over
the target firms.
[7] The Merging
Parties submit that the proposed transactions present an opportunity
for Grindrod’s “BEE partners to
realise value from their
investments and also to re-invest in Grindrod at the listed holding
company level. For Grindrod the consolidation
would enable them to
centralise management over subsidiaries and thus create efficiencies.
Competition
assessment
[8] The proposed
transactions result in no overlaps in the activities of the Merging
Parties as it’s merely a restructuring
process within Grindrod
and will thus not change competitive dynamics in any market.
[9] Due to the move
from joint to sole control post-merger, the Commission assessed the
transaction to ascertain whether any incentives
exist that might
result in the acquiring firms changing their competitive behaviour at
Unical Shipping and Sturrock.
[10]
The Commission’s assessment revealed that the shareholders’
agreement
1
of Unical Shipping and Sturrock prevents its shareholders from
entering into business undertakings which compete with the joint
venture in which they are shareholders. Furthermore, customers of the
target firms and market participants the Commission spoke
to during
its investigation raised no concerns in relation to the proposed
transactions
2
The Commission therefore concluded that the merger and the move from
joint to sole control by Grindrod would not alter the incentives
of
the merging firms.
[11] The Commission
also considered whether the implementation of the proposed
transactions will result in the effective dilution
of the active
participation of BEE firms at operational and management level of
firms associated with Grindrod, since post-merger
their diluted
equity stake at holding company level would not be one giving them
any material influence over the company’s
strategic direction.
The Commission came to the conclusion that because the proposed
transactions are also likely to raise benefits
for the BEE partners
of Grindrod that is likely to outweigh the loss of being involved in
the day to day management of the operating
firms associated with
Grindrod. The Commission thus saw no need to interfere with the
commercial decisions of the BEE firms, more
especially since no
competition concerns arise.
CONCLUSION
In
our view the Commission has correctly concluded that the merger
raises no competition issues for the reasons explained. We also
agree
that there are no substantial grounds for coming to a conclusion that
the merger could not be justified on public interest
grounds.
Although the merger does lead to the BEE minority shareholders losing
joint control over the target firms, they have freely
agreed to
exchange these investments for equity at holding level and thus
spread their risk. Following our approach in
Shell/Tepco
3
we
do not consider that we should second guess such decisions by BEE
investors - they are the best judges of their own business
interests;
accordingly we approved the transactions without conditions.
05
August 2014
DATE
Mr
Norman Manoim
Dr
Takalani Madima and Mr Anton Roskam concurring.
Tribunal Researcher:
Caroline Sserufusa
For the merging
parties: Mark Garden of Edward Nathans Sonnenbergs
For the Commission:
Werner Rysbergen
1
See
pages 761-762 of Merger record: email dated 19 May 2014, from the
Merging parties to the Commission.
2
See
Merger record at pages 884 and 886 for correspondence between the
Com
m
ission
and Shell and Total South Africa.
3
See
Shell South Africa (Pty) Ltd & Tepco Petroleum (Pty) Ltd
Case no: 66/LM/OctOl. In that case the Commission had recommended
that conditions be imposed on public interest grounds in order to
preserve control by empowerment shareholders despite their objection.
The Tribunal declined to impose the remedy and stated at paragraph
58, "...
The
competition authorities, however well-intentioned, are well advised
not to pursue their public interest mandate in an overzealous
manner
lest they damage precisely those interests that they seek ostensibly
to protect”.