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[2015] ZACT 18
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DRA Africa Holdings (Pty) Ltd v Taggart Global South Africa Investments Holdings (Pty) Ltd (020057) [2015] ZACT 18 (4 March 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
020057
In the matter
between:
DRA
AFRICA HOLDINGS (PTY)
LTD
...................................................................
Primary
Acquiring Firm
And
TAGGART
GLOBAL SOUTH
AFRICA
.......................................................................
Primary
Target Firm
INVESTMENTS
HOLDINGS (PTY) LTD
Panel: Andreas
Wessels (Presiding Member)
: Fiona Tregenna
(Tribunal Member)
: Anton Roskam
(Tribunal Member)
Heard on: 18
February 2015
Order Issued on: 18
February 2015
Reasons Issued on:
04 March 2015
Reasons for
Decision
Approval
[1] On 18 February
2015 the Competition Tribunal (“Tribunal”)
unconditionally approved the proposed merger between DRA
Africa
Holdings (Pty) Ltd (“DRA Africa Holdings”) and Taggart
Global South Africa investments Holdings (Pty) Ltd (“Taggart
Global”).
[2] The reasons for
approving the proposed transaction follow.
Parties to
transaction and their activities
Primary acquiring
firm
[3]
The primary acquiring firm is DRA Africa Holdings.
1
It is a wholly owned subsidiary of DRA Group Holdings (Pty) Ltd (“DRA
Group Holdings”). DRA Group Holdings is not controlled
by any
single firm. The five largest shareholders of DRA Group Holdings are:
the Lyon Hart Family Trust (15%), the Lilia Howe Trust
(10%), the L&S
Uys Family Trust (9%), Stuart Lawrence (5%) and the DR Share Trust
(5%). in addition to DRA Africa Holdings,
DRA Group Holdings controls
the following firms in South Africa: DRA South Africa (Pty) Ltd (75%)
and DRA Research and Development
(Pty) Ltd (100%). DRA Africa
Holdings controls a number of firms.
2
DRA South Africa (Pty) Ltd holds a 50% interest in the joint venture
ARDBEL.
[4]
DRA Group Holdings is a multinational consulting firm which provides
engineering, procurement and construction management (“EPCM”)
services. The DRA group’s activities can effectively be dividea
into iwo main categories: (i) engineering and project management
services which are focused on the mining and mineral industries; and
(ii) operations services relating to the commissioning, operation
and
maintenance of mineral processing plants. It also offers engineering
and project management services in relation to bulk materials
handling projects
3
through the joint venture ARDBEL.
4
Primary target
firm
[5]
The primary target firm is Taggart Global, a private company
incorporated in accordance with the company laws of the Republic
of
South Africa. Taggart is a wholly owned subsidiary of Forge Group
Limited (“FGL”), a company incorporated in accordance
with the laws of Australia. FGL is not controlled by any single firm.
In South Africa, FGL has a 51% shareholding in, and thereby
controls,
the following firms:
5
Taggart JHDA Engineering (Pty) Ltd (“JHDA”), Taggart
Tekpro Projects (Pty) Ltd (“Tekpro”) and Taggart LSL
Consulting (Pty) Ltd (“LSL”). LSL and Tekpro operate as a
single company and will therefore be referred to collectively
as
“LSL-Tekpro”.
[6] LSL-Tekpro is a
general and specialist engineering consultancy and project management
firm providing services to the broader
mining and mineral industries.
JHDA provides lump-sum turnkey (LSTK) and EPCM services. It
specialises in mineral processing and
materials handling.
Proposed
transaction and rationale
[7] In terms of the
proposed transaction, DRA Africa Holdings - or another nominee which
will be a 100% subsidiary of DRA Group
Holdings - will acquire 100%
of the issued shares in Taggart Global. Pursuant to the
implementation of the proposed transaction
the DRA group wilf
exercise sole control over Taggart Global.
[8]
The acquiring group’s rationale for the proposed transaction is
based
inter alia
on
its intention to expand its international business.
Relevant markets
and impact on competition
[9] The Commission
found that both the merging parties offer engineering and project
management services to the mining and mineral
industries.
[10] In relation to
market delineation, the Commission found that the product markets
comprise of a broad market for the provision
of engineering and
project management services in the mining and mineral industry, which
can be further divided into two narrower
relevant product markets.
These narrower relevant product markets are engineering and project
management services in relation to
(i) mineral processing plants; and
(ii) bulk materials handling. The Commission assessed these product
markets on a national geographic
basis.
[11] The Commission
further found that the relevant markets can be described as tender or
bidding markets and that the merged entity’s
post-merger market
shares did not raise any significant competition concerns. According
to the Commission, the postmerger market
shares of the merged entity
in each of the relevant markets will be as follows:
(i) a broad national
market for the provision of engineering and project management
services in the mining and mineral industry:
a market share of less
than 15%;
(ii) engineering and
project management services in relation to mineral processing plants
in South Africa: a market share of below
21%; and
(iii)
engineering and project management services in relation to bulk
materials handling in South Africa: a market share of less
than 10%.
[12] Moreover, the
Commission concluded that the merged entity will continue to face
competition from a number of well-established
market players such as
Worley Parsons Limited (including TWP), Amec Foster Wheeler Pic
(including MDM), Fluor and Hatch Goba (Pty)
Ltd which are active in
the broad market for engineering and project management services in
the mining and mineral industry and
the sub-market for mineral
processing plants. In relation to the sub-market for bulk materials
handling, the well-established market
players include Worley Parsons
Limited, Hatch Goba and Fluor.
[13] To supplement
its above-mentioned market share analysis, the Commission
investigated the total number of engineers employed
by the merging
parties and their competitors for EPCM in South Africa. This analysis
did not point to significant postmerger concentration
concerns.
[14] The Commission
ultimately concluded that the proposed transaction will not
substantially lessen or prevent competition in any
of the relevant
markets.
[15] The Tribunal
concurs with the Commission’s conclusion.
Public interest
[16] The Commission
did not identify any employment concerns arising from the proposed
transaction.
[17]
The merging parties confirmed that there will be no negative effect
on employment in South Africa as a direct result of the
proposed
transaction and no retrenchments as a result of the proposed
transaction.
6
[18] 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.
04 March 2015
DATE
Andreas Wessels
Anton Roskam and
Fiona Tregenna concurring
Tribunal Researcher:
Ammara Cachaiia
For
th
e
m e
rgin
g
parties: Aidan Scallan of ENS Africa
For the Commission:
Daniela Bove
1
The
initial acquiring vehicle as per the notified transaction was DRA
International Limited (“DRAI”) which, like DRA
Africa
Holdings, is ultimately controlled by DRA Group Holdings (Pty) Ltd.
However, the merging parties alerted the Tribunal to
a change in the
transaction structure whereby DRAI would be substituted with DRA
Africa Holdings or another nominee (also see paragraph
7 below). The
effect of this is simply to substitute one DRA Group Holdings’
subsidiary for another.
2
The
reasons for approving the proposed transaction follow.
3
Bulk
materials handling involves the movement of bulk materials from
receipt of the material from the mining operation, through
to final
product load onto either rail or ship.
4
ABDEL
operates on a standalone basis, offering engineering and project
management services for large-scale bulk materials handling
projects.
5
The
remaining 49% of the shares in JHDA, Tekpro and LSL are held by their
respective senior management.
6
Pages
12, 96 and 119 of the record.