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[2015] ZACT 87
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Brait Mauritius Limited v DGB (Proprietary) Limited (LM047Jun15) [2015] ZACT 87 (23 July 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM047Jun15
In
the matter between:
BRAIT
MAURITIUS
LIMITED
Acquiring Firm
And
DGB
(PROPRIETARY)
LIMITED
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Andiswa Ndoni (Tribunal
Member)
: Yasmin Carrim (Tribunal
Member)
Heard
on
: 8 July 2015
Order
Issued on
: 8 July 2015
Reasons
Issued on
: 23 July
2015
Reasons
for Decision
Approval
[1]
On 8 July 2015, the Competition Tribunal ("Tribunal")
unconditionally approved the merger between Brait Mauritius
Limited
("Brait Mauritius") and DGB (Proprietary) Limited
("DGB").
[2]
The reasons for approving the proposed transaction follow.
Parties
to Transaction and their Activities:
Primary
acquiring firm
[3]
The
primary
acquiring
firm is
Brait
Mauritius,
a
company
incorporated
in
Mauritius.
Brait
Mauritius
is
ultimately
controlled
by
Brait S.E.,
a public
company
incorporated
in
Malta.
[1]
The shareholders
holding
more than
5% of the
ordinary
issued
shares
in
Brait
S.E
are
Christoffel
Hendrik
Wiese
(34.6%)
and
The
Government
Employee
Pension
Fund
(9.8%).
In
addition to
Brait
Mauritius,
Brait S.E
controls
a
number of other firms.
Relevant
to
the
proposed
transaction
is
its
interest
in Consol
Holdings
Limited
("Consol'').
[2]
Brait
Mauritius
controls
a
number
of
firms. Of
relevance
is
its
40.84%
shareholding
in DGB, the
primary
target firm
in the
present
transaction.
[4]
The Brait Group is an international investment group that
invests predominantly in privately owned companies. It
has
interests in a variety of sectors. The activities of Consol are
relevant to the proposed transaction. Consol is a glass packaging
manufacturer in Southern Africa. It manufactures and supplies glass
packaging solutions for a number of industries including beverages
(alcoholic and non alcoholic).
Primary
target firm
[5]
The
primary
target
firm
is
DGB,
a
company
incorporated
in
accordance
with
the
laws
of
the
Republic
of
South
Africa.
DGB
is jointly
controlled
by the
following
firms:
Brait
Mauritius
(40.84%),
the
Cherub
Staff
Trust
("Cherub")
(12.26%),
Kangra
Group
(Ply}
Ltd
("Kangra")
(20.42%)
and
Pentus
Nominees
{Ply} Ltd
("Pentus")
(26.48%).
DGB
controls
a
number of
firms
in
South Africa.
[3]
[6]
DGB is a producer, wholesaler and distributor of wine, spirits and
other alcoholic and non-alcoholic beverages. It is also the
South
African agent and distributor of international spirit and other
beverage brands.
Proposed
Transaction and rationale:
[7]
In terms of the proposed transaction, Brait Mauritius intends
to acquire a further 20.42% of DGB's
shares from Kangra.
Post-merger, DGB's shareholding will be as follows: Brait Mauritius
(61.26%), Cherub (12.26%) and Pentus (26.48%).
[8]
Brait Mauritius submits that its investment portfolio is growing.
Thus, it seeks to increase its interest in DGB and grow the
business
to a scale that justifies the continued investment therein. Kangra
submits that the proposed transaction will enable it
to liquidate its
shareholding in DGB at an attractive price.
Impact
on competition:
[9]
The Competition Commission ("Commission") found that there
are no horizontal overlaps between the
activities
of the merging parties as none of the firms within the Brait Group
are active in the production and supply of wine and
spirits and as
such do not compete with DGB.
[10]
The Commission however found that a vertical relationship exists as
Consol currently supplies DGB with wine and spirit bottle
packaging.
The Commission accordingly considered whether this relationship
raised any foreclosure concerns.
[11]
In
relation
to wine
bottle packaging, the Commission
found that
Consol
currently
supplies
90%
of
DGB's
packaging
requirements,
a
position
that
is
unlikely to
change
post-merger.
[4]
Further,
DGB
accounts
for
a
mere 5%
of Consol's
annual
sales of
wine
bottles
and overall
has
less than
10% of the
total
market
share for the
production
and supply
of wine in
South Africa.
In
addition, there
are other
firms
such
as
Distel!
Group
Limited
("Distell"),
Robertson
Winery
(Pty)
Ltd
("Robertson"),
KWV
South
Africa
(P
l
y)
Ltd
("KWV')
and
Diageo
Pie
("Diageo")
that
will
procure
wine
bottle
packaging
from
Consol's
competitors
should
the
merged
entity
adopt
a
customer foreclosure
strategy
post-merger.
[12]
The
Commission
found
that
Consol
also
supplies
90%
of
DGB's
spirit
bottle
packaging.
[5]
Further,
DGB
accounts
for
approximately
3.69%
of
Consol's
annual
sales
of
spirit
bottles
and
less
than
10% of
the
total
market
share
of
the
production
and
supply
of
spirit
bottles.
Further,
there
are
numerous
other
firms
such
as
Diageo,
KWV,
Distill
and
others
that
will
continue
to
procure spirit bottle packaging
from
Consol's
competitors
post-merger.
Thus,
the
Commission
found
that
foreclosure
was
unlikely.
[13]
On such basis, the Commission concluded that the proposed transaction
is unlikely to substantially lessen or prevent
competition in
any market in South Africa.
Public
interest:
[14]
The proposed transaction raises no other public interest concerns.
Conclusion:
[16]
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.
23
July 2015
DATE
_______________________
Norman
Manoim
Yasmin
Carrim and Andiswa Ndoni concurring
Tribunal
Researcher:
Ammara Cachalia
For
the merging parties:
Hendrik Krog and Andrew Cadman, Read Hope Philips Thomas
&
Cadman
For
the Commission:
Reabetswe Molotsi and Xolela
Nokele
[1]
Brait S.E has its primary listing on the Luxembourg Stock Exchange
and a secondary listing on the Johannesburg Securities Exchange.
[2]
Brait S.E owns 3.8%
interest
and
indirectly
has a
28.1% interest
in Consol.
These
interests
afford
Brait minority shareholder protections.
[3]
See page 1O of the record.
[4]
The remaining 10%
is
predominantly supplied by Nampak Limited.
[5]
The remaining 10% is predominantly supplied by Nampak Limited.