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[2015] ZACT 106
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EOH Abantu (Pty) Ltd v Grid Control Technologies (Pty) Ltd and Others (LM158Oct15) [2015] ZACT 106 (25 November 2015)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM1580ct15
In
the matter between:
EOH
ABANTU
(PTY)
LTD
Primary Acquiring Firm
and
GRID
CONTROL
TECHNOLOGIES
(PTY)
LTD,
FORENSIC
DATA ANALYSTS (PTY)
LTD AND
INVESTIGATIVE
SOFTEWARE
SOLUTIONS
(PTY)
LTD
Primary
Target Firms
Panel
: Yasmin Carrim (Presiding Member)
: Mondo Mazwai (Tribunal
Member)
: Fiona Tregenna
(Tribunal Member)
Heard
on
: 18 November 2015
Order
Issued on
: 18 November 2015
Reasons
Issued on
: 25 November 2015
Reasons
for Decision
Approval
[1]
On 18 November 2015, the Competition
Tribunal ("Tribunal") unconditionally
approved the merger between EOH Abantu (Ply) Ltd ("EOH")
and Grid Control Technologies (Ply) Ltd ("GCT"), Forensic
Data Analysts (Ply) Ltd ("FDA") and Investigative Software
Solutions (Ply) Ltd ("ISS").
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm is EOH Abantu (Pty) Ltd ("EOH").
It is wholly controlled by EOH Holding Limited and is
a company
listed on the JSE.
[4]
EOH develops business and IT strategies, supplies and
implements solutions, and manages enterprise-wide business
systems for medium to large clients.
Primary
target firms
[5]
The primary target firms are Grid Control Technologies
(Ply) Ltd ("GCT"), Forensic Data Analysts
(Pty)
Ltd ("FDA") and Investigative Software Solutions (Ply)
Ltd ("ISS"). These firms are wholly
owned by Business
Venture Investments 1549 (Ply) Ltd who is the sole
shareholder.
[6]
GCT manufactures and provides water and electricity metering
solutions which allows municipalities and landlords to better manage
and interface with its energy and water users.
[7]
FDA
provides forensic software and hardware solutions.
Its
products include forensic
evidence
management
[1]
,
firearm
management
[2]
and
forensic
hardware
and
equipment.
[3]
[8]
ISS provides analytical software solutions on the IBM i2
product suite. These solutions are provided
to
customers for forensic investigative purposes.
Proposed
transaction and rationale
[9]
The proposed transaction involves EOH purchasing 100% of the target
firms' shares from its shareholder.
[10]
EOH submits that the acquisition will assist it in leveraging its
business by allowing it to expand its existing product offering
and
acquire strong management teams.
[11]
The target firms' shareholder submits that the transaction will allow
it to recoup its investment as well as provide the target
firms and
its employees with better growth opportunities through a larger
listed group.
Impact
on competition
[12]
The Commission considered the activities of the merging parties and
found there was no product overlap. The Commission engaged
with a
number of the parties' customers and found that there was no evidence
of demand side substitutability. Customers were not
able to
substitute the target firms' products with those of the
acquiring firm
[13]
However given that the merging parties have two business
units, namely Energy Insight and Energy
Cybernetics
which provide energy management services, similar to that offered by
GCT, the Commission then considered whether there
was any prospect of
supply side substitutability.
[14]
Energy Insight and Energy Cybernetics's core
competency is to assist customers with energy
usage
optimization and energy cost management. GCT's core competency is to
upgrade meters and provide appropriate software solutions
to allow
customers to manage the administrative aspects of water and
electricity usage by end-users. In its investigation, the
Commission
found that these services were not substitutable.
[15]
Furthermore the merging parties submitted that there were a number of
factors which impeded their ability to provide a more
comprehensive
utility management system and as such had no intention of upgrading
the system post-merger. This included the substantial
cash and time
investment as well as significant staff training costs that would be
required to refocus the businesses from their
current core
competencies. Based on the above, the Commission concluded there was
unlikely to be any supply side substitution.
[16]
We concur with the Commission's competition assessment that
the proposed transaction is unlikely to substantially
prevent
or lessen competition in any relevant market.
Public
interest
[17]
The merging
parties confirmed that the proposed transaction will
not
result in
an adverse
impact
on
employment.
[4]
The proposed transaction further
raises no
other
public
interest
concerns.
Conclusion
[18]
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.
25
November 2015
DATE
______________________
Ms
Yasmin Carrim
Ms
Mondo Mazwai and Ms Fiona Tregenna concurring
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties:
Michael
Baxter, John King, Jayesh Ranchod and Renee Fielder for EOH.
Vhonani Mufamadi and Keith Keating for GCT.
For
the Commission:
Ratshidaho Mapwanya and Nolubabalo Myoli
[1]
This
product
allows
for
the
maintenance
and
tracking
of
case
related
exhibits
and
documents
in
a secure
environment.
[2]
Allows investigators to track and trace firearms and firearm permits
[3]
These products allows for the collection and processing of forensic
investigative evidence
[4]
Inter
alia
merger
record page 7.