About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Tribunal
SAFLII
>>
Databases
>>
South Africa: Competition Tribunal
>>
2016
>>
[2016] ZACT 28
|
|
ETG Inputs Holdco Ltd v Sidi Parani (Pty) Ltd (LM181Nov15) [2016] ZACT 28; [2016] 2 CPLR 846 (CT) (20 April 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM181Nov15
In the
matter between:
ETG
I
NPUTS
HOLDCO
LTD
Primary
Acquiring
Firm
and
SIDI
PARANI
(Pty)
Ltd
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
:
Anton
A. Roskam (Tribunal Member)
: Andiswa Ndoni (Tribunal
Member)
Heard o
n
:22
March
2016
Order
I
ssued
on
:
22 March
2016
Reasons
I
ssued
on
: 20 April 2016
Reasons
for Decision
Approval
[1] On 22
March 2016, the Competition Tribunal ("Tribunal") approved
the proposed transaction between ETG Inputs Holdco
ltd and Sidi
Parani (Pty) Ltd.
[2] The
reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3] The
primary acquiring firm is ETG Inputs Holdco Limited ("ETG
Inputs"), a company incorporated in accordance with
the company
laws of the United Arab Emirates, which forms part of the ETG Group.
ETG Inputs is a wholly owned subsidiary of ETC
Group (Mauritius) a
company incorporated in accordance with the company laws of
Mauritius.
[4] ETG
Inputs operates through a number of entities and is involved in
commodity trading and logistics. However, relevant
for the assessment
of the proposed transaction is its subsidiary Kynoch's activities as
an importer, manufacturer, blender and
distributor of fertilizer in
South Africa and in other South African Development Community (SADC)
territories. Kynoch manufactures
liquid fertilizer and blends and
bags dry fertilizer. Its liquid fertilizer is produced in Endicotte
and Kimberly. Kynoch also
sells satellite blenders with its NPK
blended fertilizer operation located in Durban, Richards Bay,
Endicotte and Viljoenskroon
Primary
target firm
[5]
The primary target firm is Sidi Parani (Pty) Ltd
("Sidi Parani"), a company
incorporated in terms of the company
l
aws
of South Africa and which is controlled by Curions (Pty) Ltd
("Curions").
[6] Sidi
Parani supplies an extended range of plant nutrition products in
South Africa, and has operations in the Northern Cape,
North West,
Free State, Eastern Cape, Kwa-Zulu Natal and Mpumalanga. It also
currently has operations in Namibia.
Proposed
transaction
and
rationale
[7] ETG
intends to acquire 49% of the issued share capital of Sidi Parani.
Post transaction, Sidi Parani will be jointly controlled
by ETG
Inputs and Curions. ETG Inputs also has an entitlement to a call
option to acquire a further 2% of the issued share capital
under
certain conditions.
[8] The
ETG Group recognizes that Sidi Parani is an established and well
recognized brand with a product range and distribution
network which
they believe will assist them in leveraging their business in the
market.
[9] Sidi
Parani submits that the proposed transaction will create a more
synergetic and efficient competitor in the South African
agricultural
sector, given that the ETG Group is an international,
multi-dimensional agricultural supply chain group which trades
in a
wide variety of agricultural commodities, including fertilizers,
mainly outside of South Africa.
I
mpact
on competition
[10]
During its investigation the Commission found that the activities of
the merging parties overlapped, in that Kynoch and Sidi
Parani
manufacture and distribute dry (granular) fertilizer and liquid
fertilizer.
[11] The
Commission identified a horizontal overlap with respect to liquid and
granular NPG blended fertilizer and a vertical overlap
in that Kynoch
supplies fertilizer to such as Urea on an
ad hoc
basis to Sidi
Parani in the manufacture of NPK fertilizers.
[12] The
Commission therefore assessed the following theories of harm,
unilateral effects, coordinated effects, input and customer
foreclosure. The Commission further assessed the competition effects
of the proposed transaction in the following markets:
•
the
national market for the sale of l
i
quid
fertil
i
zer;
•
the
national market for the sale of granular fertilizer;
•
the
market for liquid blended fertilizer in the Northern Cape;
•
the
market for liquid blended fertilizer in
the Free State;
•
the
market for
l
i
quid
blended ferti
l
izer
in the North West:
•
the
market for granular fertilizer in
the
Northern Cape;
•
the
market for granular fertilizer in
the
Eastern Cape;
•
the
market for granular fertilizer in Kwa-Zulu Natal;
•
the
market for granular fertilizer in
the
Free State;
•
the
market for granular
fertilizer
in Mpumalanga;
•
the
market for granular fertilizer in
the
North
West.
[13] With
respect to unilateral effects, the Commission found that the merged
entity will have low market shares in all fertilizer
markets except
the Northern Cape market where the merged entities will have a
post-merger market share of 72.2% for liquid fertilizers
and
approximately 40% for granular fertilizers. The Commission is of the
view that the proposed transaction would not alter these
markets and
the merged entity will continue to face competition. The Commission
finds that a substantial lessening of competition
is unlikely and is
therefore of the view that these markets do not need to be analysed
further.
[14] In
its analysis of the Northern Cape market, the Commission found that
the merged entity will still face competition due to
relatively low
barriers to entry. The high market shares in both the liquid and
granular market is attributable to Sidi Parani
with ETG Inputs
holding less than 5% in the liquid market and less than 10% in the
granular market. Therefore the Commission was
of the view that
despite the high market shares the structure of the market was not
altered significantly post-merger. The Commission
also found that
fertilizer suppliers from other provinces do supply granular and
liquid fertilizer in the Northern Cape. The Commission
also found
that customers have countervailing power. Therefore the Commission
concluded that the proposed transaction is
unlikely to result
in a substantial prevention or lessening of competition in the
Northern Cape.
[15] With
respect to the vertical overlap, the Commission found that the merged
entity will not have the ability to engage in input
foreclosure due
to low market shares in the national markets for potassium chloride
and urea which are the fertilizers used in
the manufacture of NPK
blended fertilizers. With respect to customer foreclosure, the
Commission found that the merged entities
will not have the ability
to engage in customer foreclosure due to low market shares in the NPK
blended fertilizer market.
[16] With
respect to coordinated effects, the Commission found that the
proposed transaction does not significantly alter the structure
of
the market in the Northern Cape. Further the merging parties do not
compete in any other market except in the fertilizer market.
The
Commission further found that the merging parties have not been
implicated in any collusive conduct in the past. The Commission
concludes that the proposed transaction is unlikely to lead to any
coordinated effects post-transaction.
[17] In
the absence of facts to the contrary the Tribunal concurs with the
Commission and finds that the proposed transaction would
not result
in a substantial lessening of competition.
Public
Interest
[18] The
merging parties submit that there would be a minimal impact on
employment as it would affect two positions at Sidi Parani
namely the
supply chain manager and the administration/finance positions. In
relation to the supply chain manager the position
would
post-transaction require less responsibility and may accordingly
require a decrease in salary. [The person employed has 15
years
senior management experience and has worked for many years in the
fertilizer industry]. The administration/finance position
will be
redundant post transaction as the merging parties intend to combine
the finance and administration management functions
into a financial
manager position. They submit that the person whose position is made
redundant will be able to apply for the financial
manager position.
[19]
The Commission
finds
that
employees notified of
the
merger raised no
objections.
The
Commission
enquired whether the supply chain manager was consulted and has not
yet
been
but
that
they
intend
to
comply
fully
with
re
l
evant
l
abour
l
egislation.
The Commission
also
found
that
the
administration
manager
resigned
voluntarily
as
he
obtained alternative employment.
The Commission enquired
whether there would be
further
restructuring or consolidation and found
in the negative therefore
concluding
that
the
proposed
transaction
would
not
negatively
affect
public
interest.
The
employees managing
the
target
properties will remain
unchanged
.
[20] The
proposed transaction further raised no other public interest
concerns.
Conclusion
[21] 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 other public interest issues arise
from the proposed transaction. Accordingly, we approve
the proposed
transaction unconditionally.
20
April 2016
DATE
___________________________
Ms
Yasmin
Carrim
Mr
Anton
A. Roskam
and
Ms
Andiswa
Ndoni
concurring
Tribunal
Researcher: Aneesa
Ravat
For
the merging parties: Willem de Villiers
of Glen Marais, Cas Prinsloo of Sidi
Parani and
Eugene
Muller of
ETG.
For the
Commission: Gilberto Biachana