About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2016
>>
[2016] ZACT 1
|
|
Barloworld Logistics Africa (Pty) Ltd v KLL Group (Pty) Ltd (LM146Oct15) [2016] ZACT 1 (20 January 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM1460ct15
In
the matter between:
Barloworld
Logistics Africa
(Pty)
Ltd
Acquiring Firm
and
KLL
Group
(Pty)
Ltd
Target Firm
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 : 20 January 2016
Reasons
for Decision
Approval
1.
On 18 November 2015 the Competition Tribunal (the ''Tribunal")
unconditionally approved an acquisition by Barloworld Logistics
Africa (Pty) Ltd ("BWLA") of
KLL
Group Proprietary
Ltd
("KLL").
2.
The reasons for the approval of the proposed transaction follow.
The
Parties and their activities
3.
The primary acqu1nng firm is BWLA. BWLA is controlled by Barloworld
Logistics (Pty) Ltd ("Barloworld Logistics"). Barloworld
Logistics is controlled by Barloworld Investments (Pty) Ltd
("Barloworld Investments"). Barloworld Investments is a
wholly-owned subsidiary of Barloworld Ltd ("Barloworld Ltd").
Barloworld Ltd maintains a primary listing on the JSE Ltd
and has
secondary listings on the London and Namibian stock exchanges. The
shares of Barloworld Ltd are widely held and the firm
is not
controlled by any one entity.
4.
Barloworld Ltd controls a number of subsidiaries which include the
following: Barloworld Capital (Pty) Ltd, Barloworld Equipment
Properties (Pty) Ltd, Barloworld Equipment Africa (Pty) Ltd,
Barloworld Equipment (Pty) Ltd and Barloworld Global Services (Pty)
Ltd. BWLA's subsidiaries include the following firms: ZA Trans
Logistics (Pty) Ltd, Volumax (Pty) Ltd, Green Dream
Projects 12 (Pty) Ltd, Barloworld Optimus Holdings (Pty)
Ltd and Barloworld Transport.
5.
The companies in the BWLA group of companies conduct a wide range of
activities relating to the design, implementation, management
and
operation of supply chain solutions, which enable BWLA's clients to
become more competitive, leaner and more effective organizations.
BWLA's activities relevant for this transaction are the following
logistics activities:
(i)
Warehousing and distribution - clients' warehousing and distribution
solutions are designed, implemented, managed and operated
by BWLA.
These customised solutions include cross-docking, racking, shelving,
pick and pack, and track and trace capabilities;
and
(ii)
Transport Management Services - BWLA has developed software and
methodologies which combine route optimisation, supplier procurement,
transport expertise and business intelligence with dedicated
management.
6.
The primary target firm is KLL. The firms falling within the KLL
group of companies include KLL Distributors CC, KLL Management
CC,
KLL Trading CC, KLL Distributors Polokwane CC, KLL Distributors PE
CC, Just a Wish 49 CC and KLL Ice Cream CC.
7.
KLL conducts business as a multi-temperature food distributor in
South Africa, utilising small to medium temperature controlled
delivery vehicles and leased or owned temperature controlled
warehousing facilities. KLL delivers dry, perishable and frozen food
products nationally. KLL provides its distribution services to
various suppliers (importers and local food manufacturers) as well
as
to customers operating convenience retail, franchise and general
trade outlets.
Proposed
transaction
and
rationale
8.
In terms of the proposed transaction, BWLA, intends- to acquire 100%
of the issued share capital of KLL. On completion of the
proposed
transaction, BWLA will have sole control over KLL.
9.
BWLA sees this transaction as an opportunity to enter into
temperature controlled distribution of food products. BWLA believes
that this entry will
inter
alia
increase
competition in temperature-controlled distribution services.
10.
KLL shareholders wish to realise their investment in cash and have
sufficient access to capital, which BWLA will supply, in
order to
grow
KLL
into a meaningful market player.
Competition
Analysis
11.
Although BWLA is involved in warehousing and distribution services,
the Commission found that BWLA is currently not engaged
in the supply
of temperature controlled warehousing and distribution services in
South Africa. This was also
confirmed by
competitors of the merging parties
contacted by the Commission. The
Commission therefore concluded
that there is no horizontal overlap in the activities of the merging
parties.
12.
The Commission however found that there is a vertical relationship
between the merging parties as BWLA subcontracted warehousing
and
distribution of food products services to KLL on an arms-length
basis. The Commission is of the view that this relationship
is
unlikely to lead to any foreclosure concerns as the contract
currently amounts to less than 1% of the gross annual turnover
of
KLL.
13.
The Commission received a concern from a certain competitor of the
merging parties. The competitor alleges that KLL controls
at least
80% of the pie distribution market to forecourt and convenience
channels through its distribution relationship with the
manufacturer
of Piemans Pies, namely, Foodcorp (Pty) Ltd ("Foodcorp").
The competitor further submits it that its efforts
to compete in the
pie clistribution market have been unsuccessful because of the
dominant position held by the Pieman's pies product.
The competitor
is concerned that post-merger the merging parties will become more
dominant, making- competition in this regard
even more difficult,
ultimately to the detriment of consumers.
14.
The Commission investigated this complaint and found that: (i) KLL
does not distribute pies on behalf of any other pie producer
in South
Africa, (ii) the relationship that KLL has with Foodcorp is not
exclusive in nature and Foodcorp is not the sole supplier
of pies in
the market and (iii) there are other competitors in the market for
the distribution and warehousing of temperature controlled
products
which have been able to compete with
KLL
regardless of
the Foodcorp contract. These include Vector Logistics, Digistics,
Imperial Cold Logistics and Rhodes Foods. Based
on this, the
Commission concluded that the proposed transaction will not
substantially prevent or lessen competition in any market.
Public
interest
15.
The merging parties confirmed that the proposed transaction will have
no adverse effect on employment and will not result in
any
retrenchments in South Africa. The proposed transaction raises no
other public interest concerns.
Conclusion
16.
In light of the above, we agree with the Commission that the proposed
transaction is unlikely to substantially prevent or lessen
competition in any market. Further, we agree with the Commission that
the proposed transaction is unlikely to result in any public
interest
concerns. We therefore approve the proposed transaction
unconditionally.
20
January 2016
Date
______________________
Ms
Yasmin Carrim
Ms
Mondo
Mazwai and
Professor
Fiona
Tregenna
concurring
Tribunal
Researcher :
lpeleng Selaledi
For
the merging parties : Shakti Wood of
Bowman Gilfillan
For
the Commission :
Nolubabalo Myoli