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[2016] ZACT 47
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Eoh Intelligent Infrastructure Proprietary Limited v Joat Sales and Services Proprietary Limited and Others (LM019May16) [2016] ZACT 47 (14 June 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM019May16
In
the matter between:
EOH
Intelligent
Infrastructure
Proprietary
limited
Primary Acquiring Firm
and
JOAT
Sales and Services Proprietary Limited JOAT
Consulting
Proprietary Limited
JOAT
Sales and Services EC Proprietary Limited
JOAT
Sales
and
Services
GP
Proprietary
Limited
Primary Target Firms
Panel
: Norman Manoim (Presiding Member)
: Andreas Wessels (Tribunal
Member)
: Mondo Mazwai (Tribunal Member)
Heard
on
: 1 June 2016
Order
Issued on
: 1 June 2016
Reasons
Issued on
: 14 June 2016
Reasons
for Decision
Approval
[1]
On 1 June 2016, the Competition Tribunal (''Tribunal")
unconditionally approved the merger between EOH Intelligent
Infrastructure
Proprietary limited ("EOH") and the target
firms; JOAT Sales and Services Proprietary Limited, JOAT Consulting
Proprietary
Limited, JOAT Sales and
Services EC Proprietary Limited, JOAT Sales and
Services GP Proprietary
Limited (hereinafter referred to as the
"target firms").
[2]
The reasons for approving the proposed transaction follow.
Parties
to transaction
Primary
acquiring firm
[3]
The primary acquiring firm EOH is wholly controlled by EOH Holdings
Limited. EOH implements enterprise applications and has
a wide range
of outsourcing, cloud and managed services which it offers to
customers within South Africa and abroad. Relevant to
this
transaction are the products and services EOH offers to the water
industry. The services offered include consulting engineering
services relating to roads and drainage planning, water quality
planning and monitoring, design services relating to water
distribution
and sewer reticulation systems, and the construction of
water and wastewater treatment plans.
Primary
target firm
[4]
The primary target firms are not part of a group structure despite
the similarity of their names but have two common shareholders
in
each company. The target firms provide a variety of products and
consulting services to enable their customers to deal with
the
problem of waste water due to leaks or other reasons. This is
referred to in the industry parlance as non-revenue water as
the
customer is unable to recover the costs of provision of this waste
water. The products provided include measurement devices,
valves,
instrumentation and control technology. The services include leak
detection, the repair and restoration of pipes and the
provision of
analytical reports.
Proposed
transaction and rationale
[5]
The proposed transaction involves EOH acquiring 100% of the issued
share capital in the target firms, the transaction itself
was noted
to be indivisible due to the common shareholding in each firm.
[6]
EOH has submitted that the proposed transaction is a solid business
investment as it would provide it with additional product
and service
offerings to add to its existing portfolio. The target firms see the
proposed transaction as a way to recoup their
investment as well as
allow JOAT and its employee's better growth opportunities by aligning
itself with a listed company.
Impact
on competition
[7]
The Competition Commission ("the Commission") has found
that there is no horizontal overlap between the merging parties.
It
concluded that the services offered by the target and acquiring firms
are distinct and not substitutable. The merging parties
confirmed
this at the hearing. The main issue for the Commission was whether
the merger could lead to a bundling strategy given
the complementary
nature of the services. Following on enquiries, mostly with local
authorities and public utilities, which form
the customer base, the
Commission concluded that bundling was unlikely as the customers
tender for these services and do so separately.
[8]
We concur with the Commission's competition assessment, i.e. that the
proposed transaction is unlikely to substantially prevent
or lessen
competition in any relevant market as there is no overlap present.
Public
interest
[9]
The
merging
parties
confirmed
that
the
proposed
transaction
will
not
result
in an adverse
impact on employment.
[1]
The proposed transaction
further
raises
no other
public
interest concerns.
Conclusion
[10]
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 transactions. Accordingly, we approve the
proposed
transaction unconditionally
14
June 2016
DATE
_________________
Mr
Norman Manoim
Mr
Andeas Wessels and Ms Mondo Mazwai concurring
Tribunal
Researcher:
Aneesa Raval
For
the merging parties:
Michael Baxter of EOH Limited
For
the Commission:
Relebohile Thabane and Kholiswa
Mnisi
[1]
Inter
al
i
a
merger
record page
7.