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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM150Oct15
In the matter between:
MAIN STREET 1389 PROPRIETARY LIMITED Primary Acquiring Firm
and
ACCESS PLATFORMS PROPRIETARY LIMITED Primary Target Firm
Panel : Mondo Mazwai (Presiding Member)
: Yasmin Carrim (Tribunal Member)
: Medi Mokuena (Tribunal Member)
Heard on : 18 December 2015
Order Issued on : 18 December 2015
Reasons Issued on : 19 January 2016
Reasons for Decision
Approval
[1] On 18 December 2015, the Competition Tribunal (“Tribunal”) approved the proposed
transaction between Main Street 1389 Proprietary Limited and Access Platforms
Proprietary Limited.
[2] The reasons for approving the proposed transaction follow.
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Parties to proposed transaction
Primary acquiring firm
[3] The primary acquiring firm is Main Street 1389 Proprietary Limited (“Main Street”) a
company incorporated in acc ordance with the company laws of South Africa. Main
Street is a special purpose vehicle company established for the purpose of the
proposed transaction. It does not c onduct any business and has no employees. It
also does not control any firms.
[4] Main Street is solely controlled by Ethos Private Equity Fund VI (“Ethos Fund VI”), a
private equity fund which has direct and indirect control of a number of subsidiaries.
Ethos Private Equity Fund VI currently hold s a minority interest in WACO
International Holdings Proprietary Limited (“WACO”), which in turn control s Skyjacks
(Pty) Ltd (“Skyjacks”). Skyjacks is involved in the sale , rental and servicing of
powered access equipment in South Africa. Ethos Fund VI submits that although it
has an indir ect minority interest in Skyjacks it is not involved at a strategic and
operational level.
Primary target firm
[5] The primary target firm is Access Platforms Proprietary Limited (“Access Platforms”),
a private company incorporated in accordance with the company laws of South
Africa. Access Platforms is a holding company which directly and indirectly controls a
number of subsidiary firms within the Eazi Group of companies in South Africa.
[6] The Eazi Group is involved in the sale, rental and servicing of new and used powered
access equipment in South Africa and the SADC countries.
Proposed transaction and rationale
[7] Main Street intends to acquire 100% of the issued shares and claims of Access
Platforms. On completion of the proposed transaction Ethos Fund VI will indirectly
control, through Main Street, Access Platforms and the Eazi Group. Furthermore, in
consideration for the sale of their shares in Access Platforms, the Seller and the CEO
of Eazi Group will acquire a minority shareholding in Main Street.
of Eazi Group will acquire a minority shareholding in Main Street.
[8] The acquiring firm submits that the proposed acquisition represents an attractive
private equity investment opportunity. The target firm has a strong position in the
market with a relatively stable volume growth outlook. Ethos submits that this position
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could be enhanced through a short -term value-add programme as well as additional
medium to longer -term initiatives that will deliver sustainability and/or a step
change for the business. Furthermore additional strategic opportunities were
identified and include further investment in offering, expanding geographically a nd
targeted projects that will facilitate the growth of the business.
[9] The target firm submits that the proposed transact ion represents an opportunity to
acquire additional investment by a private equity investor. They predict that through
the transaction they will not only be able to realise additional capital but will also
acquire business expertise which t hey hope will facilitate additional growth and
expansion for the Eazi Group.
Impact on competition
[10] The Commission noted a horizontal overlap between the business activities of
WACO, through its subsidiary Skyjacks and one of Access Platform’s subsidiary
companies, the Eazi Group in South Africa in respect of the sale, rental and servicing
of powered access equipment.
[11] In terms of this overlap, the market shares for Skyjacks and the Eazi Group are 3%
and 60% respectively, resulting in a post -merger mark et share accretion of 60%.
Despite the high post -merger market share of 63%, the Commission is of the view
that the merged entity is unlikely to exercise market power, as the proposed merger
does not significantly alter the structure of the market. The acquiring firm which is
relatively small in the affected market is replacing the largest player. Furthermore
there are also several viable alternatives present in the market which include
Goscor Access Rental, SOS Access Rental, Aerial Lift Rentals and other smaller
players.
[12] It should be noted that p rior to the instant transaction, WACO had intended to list on
the Johannesburg Stock Exchange (JSE) for the main purpose of allowing Ethos and
the Johannesburg Stock Exchange (JSE) for the main purpose of allowing Ethos and
its other investors to divest from WACO. However due to the unforeseen incident of
the M1 bridge collapse this listing was postponed. While at the time of the hearing
there was still no indication of when the divestiture would take place, the parties
submitted that they had no intention of int egrating or merging the businesses of
Skyjacks and Access Platform s. In addition the parties undertook to inform the
Commission and the Tribunal of the listing.
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[13] The Commission also considered other factors which may impact on the merging
parties’ ability to exercise market power such as barriers to entry. It was found that
barriers to entry were generally low; there were no regulatory requirements for the
establishment of a sales, rental and servicing business; and no skill set required
given that t he equipment is not manufactured but imported into South Africa. In
addition, there was evidence of new entry in the relevant market.
[14] In terms of a vertical relationship, the Commission considered the commercial
business relationship between the merging parties, in which the Eazi Group supplies
powered access equipment to Skyjacks . The merging parties submit that given that
all suppliers import product, Skyjacks had merely procured the equipment from the
Eazi Group as a matter of convenience as opposed to procuring it from an
international supplier. Furthermore they submit that this is not a true vertical
relationship in the sense that the equipment supplied by the Eazi Group to Skyjacks
is not used as inputs in Skyjacks' manufacturing proces ses. The Commission
concurred with this view and further noted the presence of a large number of
alternative suppliers in the market which would continue to constrain the behavior of
the merged entity.
[15] The Commission therefore concluded that the propo sed transaction is unlikely to
substantially prevent or lessen competition in any relevant market.
[16] 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
[17] The merging parties confirmed that the proposed transaction will not result in an y
adverse impact on employment.1
[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
[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
1 Inter alia merger record page 59.
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public interest issues arise from the proposed transaction. Accordingly, we approve
the proposed transaction unconditionally.
____________________ 19 January 2016
Ms Mondo Mazwai DATE
Ms Yasmin Carrim and Ms Medi Mokuena concurring
Tribunal Researcher: Karissa Moothoo Padayachie
For the merging parties: Shawn van der Meulen from Webber Wentzel
For the Commission: Daniela Bove