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[2016] ZACT 65
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Invenfin Proprietary Limited v Dynamic Commodities Proprietary Limited (LM044JUN16) [2016] ZACT 65 (12 August 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM044Jun16
In
the matter between:
lnvenfin
Proprietary
Limited
Primary Acquiring Firm(s)
and
Dynamic
Commodities
Proprietary
Limited
Primary Target Firm(s)
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 lnvenfin Proprietary
Limited and
Dynamic Commodities Proprietary Limited.
[
2 ] The reasons for approving the proposed transaction follow.
Parties
to the transaction
Primary
acquiring firm(s)
[
3 ] The primary acquiring firm is lnvenfin Proprietary Limited
("lnvenfin"), a company incorporated in accordance
with the
laws of the Republic of South Africa.
[
4 ] lnvenfin is wholly owned by Remgro Limited ("Remgro"),
a company listed on the Johannesburg Securities Exchange
and as such
is not controlled by any firm.
[
5 ] Remgro and its subsidiaries including lnvenfin will collectively
be referred to as the "Acquiring Group".
[
6 ] Of relevance to the proposed transaction are the Acquiring
Group's activities in the food industry and in particular, in the
market for frozen processed food.
Primary
target firm(s)
[
7 ] The primary target firm is Dynamic Commodities (Pty) Ltd
("DC"), a company incorporated in accordance with
the laws
of the Republic of South Africa. DC wholly owns a number of
subsidiaries. As such, DC and its subsidiaries will collectively
be
referred to as the "Target Group".
[
8 ] DC is an export driven business which is active in the
manufacture and supply of high quality frozen desserts and snacks.
Proposed
transaction
and
rationale
[
9 ] lnvenfin intends to acquire 30% of the issued share capital of DC
which will afford it certain minority protection rights.
Post
transaction, lnvenfin will enjoy joint control over DC with the
remaining shareholders, Adrian Hugh Vardy and Hermanus Carel
Maritz.
[
10 ] The merging parties submit that the proposed transaction
represents a sound investment and which will afford the Target Group
access to the Acquiring Group's relevant expertise and experience in
order to build the business further.
Impact
on competition
[
11 ] Both firms supply frozen foods. However the Commission did not
consider the market could be defined so widely. Adopting a
narrower
definition of the markets the Commission found that while the
acquiring group was active in the supply of frozen bakery,
poultry
and seafood products, the Target Group was only active in the market
for frozen dessert products. As such, in the narrower
markets there
was no horizontal overlap between the activities of the merging
parties.
[
12 ] Notwithstanding the aforementioned, the Commission considered
the overlap between the merging parties in the broader market
for the
supply of frozen processed food and found that the merged entity's
combined market share would be less than 5%. In addition,
it would
continue to face competition from other players in the market.
[
13 ] In its assessment, the Commission also considered a potential
vertical relationship, given that the Acquiring Group through
its
subsidiary provides logistic services to DC. However the Commission
found that only 5% of the Target Group's products are distributed
in
South Africa through third parties. In addition, the Commission notes
that there are a number of other reputable logistics players
in the
market.
[
14 ] The Commission therefore concluded that the proposed transaction
was unlikely to substantially prevent or lessen competition
in any
relevant market.
[
15 ] 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
[
16 ] The merging parties submit that the proposed merger will not
have any detrimental or negative effect on employment.
[
17 ] Furthermore, given that the acquiring group is only acquiring a
proportion of the shareholding and that the current shareholder
will
still exercise control over the Target Group, the Commission was of
the view that the proposed transaction was unlikely to
result in a
negative effect on employment.
[
18 ] The proposed transaction further did not raise any other public
interest concerns.
Conclusion
[
19 ] 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
Medi Mokuena and Ms Andiswa Ndoni concurring
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the merging parties: Cliffe Dekker Hofmeyr
and Stuart Gast from lnvenfin
For
the Commission:
Billy Mabatamela and Xolela Nokele