About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2015
>>
[2015] ZACT 7
|
|
KAP Industrial Holdings Limited v Metz Industrial (Pty) Ltd (019646) [2015] ZACT 7 (14 January 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 019646
In the matter
between:
KAP
INDUSTRIAL HOLDINGS
LIMITED
........................................................
Primary
Acquiring Firm
And
METZ
INDUSTRIAL (PTY)
LTD
..............................................................................
Primary
Target Firms
Panel: Norman Manoim
(Presiding Member)
: Anton A. Roskam
(Tribunal Member)
: Yasmin Carrim
(Tribunal Member)
Heard on: 12
December 2014
Order Issued on: 12
December 2014
Reasons Issued on :
14 January 2015
Reasons for
Decision
Approval
[1] On 12 December
2014, the Competition Tribunal (“Tribunal”)
unconditionally approved the merger between KAP Industrial
Holdings
Limited (“KAP”) and Metz Industrial (Pty) Ltd (“Metz”).
[2] The reasons for
approving the proposed transaction follow.
Parties to
transaction
Primary acquiring
firm
[3] The primary
acquiring firm is KAP, a public company listed on the Johannesburg
Stock Exchange Limited. KAP is wholly owned by
Steinhoff
international Holdings Limited.
[4] KAP is a
manufacturing business with an industrial segment and a consumer
segment and owns industrial companies in four operating
divisions
namely Manufacturing, Specialist Supply Chain, Passenger and
Integrated Timber. The Manufacturing division of KAP specifically
KAP
Raw Materials (Pty) Ltd is relevant.
[5] The divisions of
KAP Raw Materials (Pty) Ltd which are relevant for the purposes of
this transaction are the following; VitaFoam
for the production of
flexible polyurethane foam, BCM for its manufacture and distribution
of bedding components such as inner
mattress springs and other
bedding accessories and DesleeMattex for its manufacture of woven and
knitted fabrics for the bedding
industry.
[6] KAP is not
subject to “control” as envisaged in the Competition Act.
Primary target
firm
[7]
The
primary target firm is Metz which owns and controls Restonic
Proprietary Limited (“Restonic”).
[8] Restonic is a
manufacturing company which manufactures inner- spring mattresses for
the purpose of sale to large national furniture
retailers.
[9] Metz Transport,
an in-house logistics company whose sole purpose is the delivery of
products manufactured by Restonic to its
customers.
Proposed
transaction and rationale
[10] The proposed
transaction involves KAP acquiring 100 percent control of Metz by
virtue of the acquisition of 100 percent of
shares issued by Metz.
[11] The acquiring
firm submits that the rationale for the proposed transaction is to
enable itself to enter the inner- spring mattress
market with an
established inner- spring mattress brand. The acquisition will
further allow KAP to expand its existing bedding
manufacturing
business.
[12] The target
firms submitted that the proposed transaction presents an opportunity
for significant growth opportunities. The
merged entity would also
allow for the facilitation of affordable bedding products and more
efficient and cost- effective exporting
of bedding products.
Impact on
competition
[13] The Competition
Commission’s (the “Commission”) findings identified
a potential horizontal and vertical overlap
arising as a resuit of
the proposed transaction.
[14] The horizontal
overlap identified by the Commission is in respect to both parties
involvement in the manufacture and supply
of bedding. The Commission
in their investigation consulted competitors and customers of the
merging parties and concluded that
the technologies involved in the
manufacturing processes for inner-spri ng mattresses and foam
mattresses are different. As a result
the Commission concluded that
inner-spring mattresses manufactured by Restonic do not compete with
the foam mattresses manufactured
by KAP’s Vitafoam division.
[15] In our view the
fact that manufacturing processes differ is not a sufficient basis to
conclude that functionally similar products
are not substitutes. At
the hearing we raised this issue with the Commission and merging
parties. We were informed that if the
mattresses were considered to
be in the same market then post-merger the combined market share
would be only 6%. Given the low
market share on this alternative view
of the market it is not necessary for us to decide which market
definition is correct- on
either version there are no horizontal
competition concerns.
[16] The vertical
overlap identified by the Commission is in relation to the
possibility of foreclosure in respect of the supply
of polyurethane
foam, inner- springs and woven and knitted fabric. The Commission
indicated from its investigations that there
were no customer
concerns regarding the merger. As a precaution we sought specific
confirmation on this from the Bravo Group Manufacturing
(Pty) Ltd
(“Bravo Group”), 'which is Restonic’s most
significant domestic competitor as well as a key customer
of KAP’s
BCM division
1
for its inner spring inputs. Bravo Group in
correspondence with the Commission after the hearing confirmed that
it has alternatives
if the merged entity were to foreclose it and did
not express concerns about the merger. The Commission concluded that
there was
a low risk of foreclosure, post-merger in respect of these
three inputs.
[17] We concur with
the Commission’s conclusion that the proposed transaction is
unlikely to substantially prevent or lessen
competition in any
relevant market.
Public interest
[18]
The merging parties confirmed that the proposed transaction will not
result in an adverse impact on employment
1
The proposed transaction further raises no other public interest
concerns.
Conclusion
[19] In light of the
above, we conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition
in any relevant market.
In addition, no public interest issues arise from the proposed
transactions. Accordingly we approve the
proposed transaction
unconditionally.
14 January 2015
DATE
Norman Manoim
Anton A. Roskam
and Yasmin Carrim concurring
Tribunal Researcher:
Aneesa Ravat
For the merging
parties: Heather Irvine and Mmadika Moloi of Norton Rose
Fulbright SA
For the Commission:
Kholiswa Mnisi and Lindiwe Khumalo
1
Inter
alia
merger
record page 10.