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[2015] ZACT 117
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Dimension Data Middle East and Another v Britehouse Holdings (Pty) Ltd (LM092Aug15) [2015] ZACT 117 (9 September 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM092Aug15
In
the matter between:
DIMENSION
DATA MIDDLE EAST AND
AFRICA
(PTY)
LTD
Primary Acquiring Firm
And
BRITEHOUSE
HOLDINGS
(PTY)
LTD
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Andreas Wessels
(Tribunal Member)
: Medi Mokuena (Tribunal
Member)
Heard
on
: 26 August 2015
Order
Issued on
: 26 August 2015
Reasons
Issued on
: 9 September 2015
Reasons
for Decision
Approval
[1]
On 26 August 2015, The Competition Tribunal
("Tribunal")
conditionally approved the acquisition by Dimension Data Middle
East and Africa (Pty) Ltd
("DiData
MEA")
of the entire issued share capital in Britehouse Holdings (Pty)
Ltd
("Britehouse").
[2]
The reasons for approving the proposed transaction follow.
Parties
to the transaction
Acquiring
firm
[3]
The primary acquiring firm is DiData MEA, a holding company largely
owned and wholly controlled by Dimension Data
Holdings Pie,
which in turn is wholly controlled by Nippon Telegraph and Telephone
Corporation, a firm incorporated in Japan.
[4]
DiData MEA is an IT service provider that offers IT solutions to
clients in SA, across Africa and the Middle-East. Relevant
for the
proposed transaction is DiData MEA's service of Enterprise Resource
Planning
("ERP"),
this involves consulting
services, professional services, managed services and cloud services.
Also relevant is DiData MEA Microsoft
services which involve
technologies such as SQL, database, net SharePoint, dynamics customer
relationship management and business
intelligence.
Target
firm
[5]
The target firm is Britehouse, a company jointly controlled by
DiData SA Holdings (40%) and Newshelf 871
("Newshelf
SPV")
(60%). DiData SA Holdings is also
wholly controlled by Dimension Data Holdings Pie. Newshelf SPV is
jointly controlled
by Industrial Electronic Investments (Pty) Ltd
(49.98%) and the remaining shareholding is held by Remgro Limited
("Remgro"),
Convergence Partners (Pty) Ltd
("Convergence")
(25.01%) and Hampden Olimpico
(Pty) Ltd
("Hampden")
(25.01%). Newshelf SPV
does not control any firm apart from Britehouse.
[6]
Britehouse controls the following subsidiaries:
•
Britehouse SSD (Pty) Ltd
•
Britehouse BPM (Pty) Ltd
•
Britehouse Telematics
(Pty) Ltd
[7]
Britehouse is a specialist software service provider of ERP software,
consultancy services and applications management's services
throughout South Africa.
Proposed
Transaction and Rationale
[8]
Through this
transaction
the Dimension Data
group
will
acquire sole control over Britehouse.
However the
stakes will
be held by
two
separate
entities
within the
group.
DiData
MEA
will
hold
54%
[1]
of
the
shares
Dimension
Data
Middle
East
and
DD SA
Holdings,
which
currently
holds 40%
of the
shareholding,
will
post-transaction
hold 46%
[2]
of the
shares.
[9]
DiData MEA intends to grow its ERP business. Remgro and
Convergence wish to realise their asset. DiData SA Holdings
and
Hampden view the proposed transaction as an opportunity for long term
sustainable growth for the business.
Relevant
Market and
I
mpact on Competition
[10]
The Competition Commission ("Commission") defined two
relevant markets, the national market for the provision
of ERP
and the national market for the provision of Microsoft services.
[11]
The Commission found that in the market for provision of ERP, the
merged entity will have an estimated market share of 13.21%
(with an
accretion of 10.28%). However, the merged entity will continue to
face competition from large competitors such as Accenture
(20.56%),
Deloitte (11.75%), EOH (11.01%) and USC Solutions (5.19%).
[12]
In the market for provision of Microsoft services, the Commission
found that the merged entity will have an estimated
market
share of 5.59% (with an accretion of 3.89%). Here the merged entity
will also continue to face competition from larger competitors
such
as Accenture (21.7%), Deloitte (14.46%) and IBM (21.7%). The
Commission accordingly recommended that based on the merged entities
low market shares the proposed transaction is unlikely to
substantially prevent or lessen competition in both markets.
[13]
Some competitors raised concerns that the merged entity could
bundle its Oracle and SAP offering along with its Microsoft
services
and that it would result in input foreclosure. The Commission did not
regard this concern as valid as this was not a vertical
merger
between a supplier and its customer and secondly that neither firm
had exclusive relationships with original equipment manufacturers
so
that a bundling strategy could be replicated by rivals.
[14]
The Commission similarly rejected concerns expressed by other
competitors that the merger would give the merged firm market
power.
The Commission was of the view that the neither the market shares of
the merged firm post-merger nor the presence of large
effective
rivals that compete in the same markets as the merged firm would make
the post-merger exercise of market power likely.
[15]
The Commission accordingly concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition
in the
relevant markets. We agree with this assessment.
Public
Interest
[16]
The
merging
parties
originally
gave an
undertaking that
no
retrenchments
would
occur for a
period of one year.
The
Commission
wanted
the
undertaking to
be
imposed
as
a
condition
to
the
merger
and
moreover,
that
the
condition
be
for
two years,
because
it
had
identified
that
43
positions
within
Britehouse
overlapped
with
23
positions
within
DiData
MEA. The
Commission
and the
merging
parties
eventually
agreed
that
a two
year
moratorium
could
be imposed.
Given the
agreement
reached
between
the
Commission
and
the merging
parties
we
do not
need
to decide
this matter
and
the
undertaking is
accordingly
made
a
condition
of
the
approval
of
this
merger.
[3]
[17]
There no other public interest concerns raised.
Conclusion
[18]
In light of the above we concluded that the proposed transaction was
unlikely to substantially prevent or lessen competition.
Accordingly
we approved the proposed transaction on the condition that there will
be no retrenchments for a period of two years.
9
September 2015
DATE
_________________________
Mr
N Manoim
Mr
Wessels and Ms M Mokuena concurring
Tribunal
Researcher:
Moleboheng Moleko
For
the merging parties:
Adv. Kendall
Turner, instructed by Tyron Fourie of Eversheds
For
the Commission:
Maanda Lambani
[1]
See page 3 of transcript
[2]
See page 3 of transcript
[3]
See page 6 of transcript