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[2016] ZACT 41
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PPC Limited v 3Q Mahuma Concrete Proprietary Limited (LM213Jan16) [2016] ZACT 41; [2016] 1 CPLR 232 (CT) (12 May 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM213Jan16
In
the matter between:
PPC
LIMITED
Primary Acquiring Firm
and
3Q
MAHUMA
CONCRETE
PROPRIETARY
LIMITED
Primary Target Firm
Panel
: Andreas Wessels (Presiding Member)
: Anton Roskam (Tribunal
Member)
: Medi Mokuena (Tribunal
Member)
Heard
on :
13 April 2016
Order
Issued on :
13 April 2016
Reasons
Issued on :
12
May 2016
Reasons
for Decision
Approval
[1]
On 13 April 2016, the Competition Tribunal ("Tribunal")
approved the proposed transaction between PPG Limited and
3Q Mahuma
Concrete Proprietary Limited.
[2]
The reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firm is PPG Limited ("PPG"), a
company incorporated in accordance with the laws of the Republic
of
South Africa. PPG is listed on the Johannesburg Securities
Exchange ("JSE"). Of relevance
to
the competition assessment is that in South Africa PPG
controls a number of firms including Pronto Holdings
(Ply) Ltd
("Pronto").
[4]
PPG is a supplier of cement in Southern Africa. It also produces
aggregates, metallurgical-grade lime, burnt dolomite, limestone
and
fly-ash. Of specific relevance to the competition assessment of the
proposed transaction is that PPG supplies readymix concrete
through
Pronto.
Primary
target firm
[5]
The primary target firm is 3Q Mahuma Concrete Proprietary Limited
("3Q Mahuma"), a company incorporated in accordance
with
the laws of the Republic of South Africa.
[6]
3Q Mahuma is controlled by 3Q Group Holdings (Ply) Ltd ("3Q
Group Holdings"). 3Q Group Holdings is, in turn, controlled
by
Capital Africa Steel (Ply) Ltd ("GAS"). GAS' shareholders
are Wilson Bayly Holmes-Ovcon Limited ("WBHO")
and Brait
Societas Europaea ("Brait"). WBHO and Brait are listed
firms on the JSE.
[7]
3Q Mahuma does not control any firm.
[8]
3Q Mahuma is a manufacturer and supplier of readymix concrete in
South Africa. It is active in Gauteng, Limpopo, Mpumalanga,
the North
West and the Northern Cape.
Proposed
transaction and rationale
[9]
PPG, through Pronto, intends to acquire the entire issued share
capital of 3Q Mahuma. Pursuant to the implementation of the
proposed
transaction Pronto therefore will have sole control 3Q Mahuma.
[10]
PPG wishes to acquire 3Q Mahuma in order to grow its service
offering.
[11]
GAS is unbundling and selling its non-core assets.
Impact
on competition
[12]
The Competition Commission ("Commission") found that the
proposed transaction results in a horizontal as well as
a vertical
overlap.
[13]
With regards to the horizontal overlap, the Commission found that the
activities of PPC, through Pronto, and 3Q Mahuma overlap
in relation
to the manufacture and supply of readymix concrete.
[14]
With regards to the vertical aspect of the proposed transaction, PPC
supplies cement, aggregates and fly ash to 3Q Mahuma,
which are used
as inputs by 3Q Mahuma in the manufacturing of the readymix concrete.
Horizontal
overlap
[15]
As stated above, the Commission identified a horizontal overlap
between the merging parties' activities in the market for the
manufacture and supply of readymix concrete.
[16]
With regards to the geographic location of the readymix concrete
plants, the Commission found that Pronto's manufacturing plants
are
situated in the following areas of Gauteng: Alrode, Benoni, City
Deep, Kya Sands, Lanseria, Midrand, Pretoria West, Roodepoort
and
Silverton. The Commission further found that 3Q Mahuma has readymix
concrete plants in South Africa in the Limpopo, Mpumalanga,
Northern
Cape and North West provinces. In Gauteng, 3Q Mahuma had two so
called "project" plants at the time of
the merger filing,
one at the Mall of Africa project and the other at the Menlyn Main
project
[17]
In relation
to
30
Mahuma's
plants
in
Gauteng,
the
merging
parties
at
the
hearing
confirmed that when the merger filing was submitted there was one
project-specific plant in Midrand servicing the
Mall of
Africa
build and
there was a separate
project
specific site
at
Menlyn
servicing
the Menlyn Main
refurbishment
At
the
end
of
January 2016 the Mall of Africa
build was
however
completed and the Mall of Africa plant
was moved
to a
3Q
Mahuma
site
on
Simon
Vermooten
in
Pretoria
East
Subsequent
to
that
they ran
out
of
space
at
the Menlyn
refurbishment
site
so
effectively 3Q Mahuma moved off the Menlyn Main site and created one
consolidated project-specific plant at Simon Vermooten in
Pretoria
East
[1]
[18]
Given the above, the Commission assessed the competitive effects of
the proposed transaction in the market for the manufacture
and supply
of readymix concrete within a 25 km kilometre radius from the
merging parties' operations in Pretoria East
(Gauteng).
[19]
However, it is not necessary for the Tribunal to take a definitive
view on the exact parameters of the relevant geographic
market since
it does not affect our ultimate conclusion.
[20]
Responding
to
questions
from
the
Tribunal
at
the
hearing,
Mr
Chari
Marais
of
3Q Mahuma
explained that a distinction should be drawn between the
above-mentioned project-specific
readymix
concrete
plants
(that
may
be
used
for
smaller
or
larger
projects (such as the
Mall of
Africa
project))
and plants
that
he
referred to as
"long
term
commerciaf'
plants
that
supply
a range of customers.
He further
stated that
all 3Q Mahuma's
readymix
concrete plants potentially are movable
to a
different geographic
location
[2]
and that
in
a best-case
scenario
a
plant could
be moved to
a
different
geographic
l
ocation
in four to
six weeks.
[3]
We
however
lack
information
on the
costs
involved
in moving
these
plants,
other
potential
barriers to
moving
plants and
the criteria utilised in deciding to move plants. However, nothing
turns on this in
this case.
As indicated above, we have left
the
geographic market delineation open.
[21]
On the basis of the Commission's above-mentioned assessment of the
manufacture and supply of readymix concrete within a 25
km kilometre
radius from the merging parties' operations in Pretoria East
(Gauteng), the merged entity will have a post merger
market
share of less than 20%. Competitors in this (potential) relevant
market include AfriSam, Lafarge, Eastern Readymix and Titancrete.
The
Commission thus concluded that the proposed transaction is unlikely
to substantially prevent or lessen competition from a horizontal
perspective.
[22]
We concur with the Commission's finding that the proposed merger is
unlikely to substantially prevent or lessen competition
in the market
for the manufacture and supply of readymix concrete, regardless of
the scope of the relevant geographic market. There
are a number of
firms in various regions that compete with the merged entity in the
manufacture and supply of readymix concrete.
Vertical
assessment
[23]
As mentioned above, there is an existing vertical relationship
between PPG and 30 Mahuma. The Commission however found that
this
vertical relationship is unlikely to result in any foreclosure
concerns since there are alternative players both in the applicable
upstream and downstream markets. Furthermore, the Commission found
that the vertical relationship exists pre-merger since 30 Mahuma
currently sources the products in question from PPG. The Commission
further noted that WBHO will exit as shareholder in 30 Mahuma
post-merger.
[24]
We concur with the Commission's finding that the proposed
transaction is unlikely to raise significant vertical
competition concerns.
Public
interest
[25]
The
merging
parties
confirmed
that
there
will
be
no job
losses
as
a
result
of
the
proposed
transaction.
[4]
The proposed transaction further raises no
other
public interest
concerns.
Conclusion
[26]
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
May 2016
DATE
________________
Mr
Anreas Wessels
Mr
Anton Roskam and Ms Medi Mokuena concurring
Tribunal
Researcher:
Kameel Pancham
For
the merging parties:
Rick van Rensburg of Edward Nathan Sonnenbergs Inc
For
the Commission:
Zanele Hadebe
[1]
Transcript,
pages
5 and 6.
[2]
Transcript, pages
6
to
9.
[3]
Transcript,
page
9.
[4]
Merger record, pages 10 and 59.