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[2016] ZACT 63
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Nestle SA v R and R Ice Cream Public Limited Company (LM026MAY16) [2016] ZACT 63 (12 August 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM026May16
In
the matter between:
Nestle
S.A.
Primary Acquiring Firm
and
R&R
Ice Cream
Public
Limited
Company
Primary Target Firm
Panel
: Norman Manoim (Presiding Member)
: Medi Mokuena (Tribunal
Member)
: Andiswa Ndoni (Tribunal
Member)
Heard
on :
20 July 2016
Order
Issued on
: 20 July 2016
Reasons
Issued on
: 12 August 2016
Reasons
for Decision
Approval
[
1 ] On 20 July 2016, the Competition Tribunal ("Tribunal")
approved the large merger between Nestle S.A and R&R
Ice Cream
Public Limited Company.
[
2 ] The reasons for approving the proposed transaction follow.
Parties
to the transaction
Primary
acquiring firm
[
3 ] The primary acquiring firm is Nestle S.A ("Nestle"), a
public company incorporated in accordance with the laws of
Switzerland. Nestle is not controlled by any entity and its shares
are traded on the Swiss Stock Exchange.
[
4 ] In South Africa, Nestle wholly controls Nestle South Africa
Proprietary Limited ("Nestle South Africa") and Galderma
Laboratories South Africa Proprietary Limited ("Galderma").
[
5 ] Nestle South Africa manufactures, supplies and distributes a wide
range of food and beverage products and is also active in
non-human
food activities such as pet food and skin health products.
[
6 ] Galderma focuses on skin health by delivering medical and
non-medical solutions for the skin.
Primary
target firm(s)
[
7 ] The primary target firm is R&R Ice Cream Public Limited
Company (''R&R"), a company incorporated under the laws
of
the United Kingdom.
[
8 ] R&R is controlled by PAI Europe V ("Fund V").
[
9 ] R&R only recently entered the South African ice cream market
through its acquisition of Nestle's entire South African
ice cream
business, which became R&R SA. R&R SA manufactures, supplies
and distributes a diverse range of ice cream throughout
South Africa
under a number of brands including Country Fresh, King Cone and Jive.
Proposed
transaction and rationale
[
10 ] The proposed transaction forms part of a worldwide transaction
whereby Nestle and Fund V will establish JVCo, which will
be an
incorporated joint venture, in which Nestle and Fund V will
contribute amongst other things certain assets and rights.
[
11 ] Post-transaction, Nestle and Fund V will each hold an equal
number of shares (with equal voting rights) in JVCo. In South
Africa,
the effect of the proposed transaction will be Nestle re-acquiring
control of R&R SA through JVCo.
[
12 ] The merger parties submit that the proposed transaction will
enable the integrated business to deliver long-term sustainable
and
profitable growth. Furthermore combining the capabilities of the two
companies will position the merged entity to compete more
vigorously
in new and existing markets, and will allow for substantial
efficiencies and cost related savings.
Impact
on
competition
[
13 ] The Commission found that the proposed transaction results in a
horizontal overlap in the manufacture and supply of ice cream.
However, given that there was no geographic overlap, as a result of
Nestle South Africa not being active in the South African market,
the
Commission was of the view that the proposed transaction was unlikely
to substantially prevent or lessen competition in any
relevant
market.
[
14 ] The Commission noted that Nestle and Fund V have agreed to
a non-compete obligation in relation to the JVCo. In terms
of this
restraint, this requires that Nestle and Fund V shall not engage in
activities that compete with the JVCo's business. Given
that the
restraint is only limited to the activities that compete with the
joint venture and is only limited to a certain period,
the Commission
was of the view that the restraint is reasonable and commercially
justifiable.
[
15 ] Taken as a whole the Commission was therefore of the view
that the proposed transaction was unlikely to substantially
prevent
or lessen competition in any relevant market.
[
16 ] 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
[
17 ] The merging parties submit that there will be no negative effect
on employment as no retrenchment of employees is contemplated
as a
result of the proposed transaction. Furthermore, given that Nestle
does not operate an ice cream business in South Africa,
the proposed
transaction will not give rise to a duplication of any job functions
in R&R SA's manufacture, distribution and
supply of ice creams in
South Africa.
[
18 ] Given that there is no overlap between the activities of the
merging parties, and that R&R SA will continue to operate
independently of Nestle's South African business, the Commission was
of the view that the proposed transaction was unlikely to
have a
negative impact on employment.
[
19 ] The proposed transaction further raised no other public interest
concerns.
Conclusion
[
20 ] 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
August
2016
DATE
________________________
Mr
Norman Manoim
Ms
M di Mokuena and Ms Andiswa Ndoni concurring
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties: Webber Wentzel
For
the Commission:
Nolubabalo Myoli and Xolela Nokele