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[2016] ZACT 31
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Equatorial Trading Limited and Another v Wilmar Continental Edible Oils and Another (LM238Feb16) [2016] ZACT 31 (12 April 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM238Feb16
In
the matter between:
EQUATORIAL
TRADING LIMITED and
WILMAR
RESOURCES, PTE
LTD
Primary Acquiring Firm
and
WILMAR
CONTINENTAL EDIBLE OILS
AND
FATS (PTY)
LTD
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: Anton Roskam (Tribunal
Member)
: Andiswa Ndoni (Tribunal
Member)
Heard
on
: 22 March 2016
Order
Issued on
: 22 March 2016
Reasons
Issued on
: 12 April 2016
Reasons
for Decision
Approval
[1]
On 22 March 2016, the Competition Tribunal ("Tribunal")
approved the proposed transaction between Equatorial Trading
Limited
and Wilmar Resources, Pte Ltd and Wilmar Continental Edible Oils and
Fats (Ply) Ltd.
[2]
The reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firms are Equatorial Trading Limited
("Equatorial"), a company incorporated in accordance with
the company laws of Labuan, and Wilmar Resources, Pte Ltd ("Wilmar
Resources"), a company incorporated in accordance
with the
company laws of Singapore. Collectively they are referred to as the
"Acquiring Firms". The Acquiring Firms are
controlled by
Wilmar International Ltd ("Wilmar International").
Primary
target firm
[4]
The primary target firm is Wilmar Continental Edible Oils and Fats
(Ply) Ltd ("Wilmar Continental"), a firm incorporated
in
accordance with the company laws of the Republic of South Africa.
[5]
Wilmar Continental is a crude and refined vegetable oil manufacturer.
It produces refined edible oils and oilcake meal, as well
as dips,
mayonnaise, and other related products of vegetable oils. Its
consumer pack products are mainly sold under the "Excella"
brand. It also produces specialty fats from palm oil sold under the
"Pan Palm" brand name.
Proposed
transaction
and
rationale
[6]
In terms of the proposed transaction, Equatorial and Wilmar
Resources, will both acquire an increased shareholding in Wilmar
Continental. Wilmar International will become the indirect sole
shareholder in Wilmar Continental post-merger.
[7]
Equatorial and Wilmar Resources submit that the proposed transaction
will result in Wilmar International virtually becoming
the indirect
sole shareholder of Wilmar Continental. The target firm will benefit
from the financial strength of the Acquiring
Firms as well as
increase its links with a major international agri-business company
such as the Wilmar Group.
[8]
Wilmar Continental submits that the sellers of the target firm would
like to exit from their loss-making investment thus the
proposed
transaction is an ideal opportunity to do such.
Impact
on
competition
[9]
The Competition Commission ("Commission") found that the
proposed transaction did not result in any horizontal or
vertical
overlap. The Commission found that the proposed transaction does not
result in an alteration of the market structure as
there is no market
share accretion. Thus, the proposed transaction is unlikely to
substantially prevent or lessen competition.
However, the Commission
did assess whether the proposed transaction has the potential to
change the incentive of the Acquiring
Firms.
[10]
The Commission found that the proposed transaction is unlikely to
change the Acquiring Firms' incentive on the basis that pre-merger,
Wilmar International indirectly solely controls Wilmar Continental
given the majority shareholding it holds, and that it has the
ability
to appoint the majority of the directors through the Acquiring Firms.
[11]
The Commission also assessed whether the sellers constrained the
Acquiring Firms' ability to influence the decisions of the
business
as well as the day to day management of Wilmar Continental. It was
found that the target firm is currently run by a professional
management team (appointed by the board of Wilmar Continental), which
is to be retained post-merger. Accordingly, there will be
no change
in the day to day running of the business post-merger, therefore
there is no evidence to suggest that the sellers constrained
the
Acquiring Firms ability to influence decisions or the day to day
management of Wilmar Continental.
[12]
The Commission therefore concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition
in any
relevant market.
[13]
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
[14]
The merging parties confirmed that the proposed transaction will not
result in any adverse impact on employment.
[15]
The proposed transaction further 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
transaction. Accordingly, we
approve the proposed
transaction unconditionally.
12
April 2016
DATE
__________________________
Ms
Yasmin Carrim
Mr
Anton Roskam and Ms Andiswa Ndoni concurring
Tribunal
Researcher:
Kameel Pancham
For
the merging parties:
Norton Rose Fulbright
For
the Commission:
Relebohile Thabane