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[2016] ZACT 80
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Bidvest Group Limited v Brandcorp Holdings (Pty) Ltd (LM052Jul16) [2016] ZACT 80 (8 September 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM052Jul16
In
the matter between:
THE
BIDVEST
GROUP
LIMITED
Primary Acquiring Firm
and
BRANDCORP
HOLDINGS
(PTY)
LTD
Primary Target Firm
Panel
: AW Wessels (Presiding Member)
: Medi Mokuena (Tribunal
Member)
: Andiswa Ndoni (Tribunal
Member)
Heard
on
: 31 August 2016
Order
Issued on
: 31 August 2016
Reasons
Issued on
: 08 September 2016
Reasons
for Decision
Approval
[1]
On 31 August 2016, the Competition Tribunal ("Tribunal"}
approved the proposed transaction between The Bidvest Group
Limited
("Bidvest") and Brandcorp Holdings (Ply) Ltd ("Brandcorp").
[2]
The reasons for approving the proposed transaction follow.
Parties
to proposed transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Bidvest, a firm incorporated in
accordance with the company laws of the Republic of South Africa.
Bidvest is listed on the Johannesburg Stock Exchange Limited and is
not controlled by any single firm.
[4]
Bidvest is an international services, trading and distribution firm
and is involved in a diverse portfolio of business activities
in
South Africa including facilities management, security, travel,
automotive, freight and financial services.
[5]
In South Africa, Bidvest controls the following firms that are
relevant to the competition assessment of the proposed transaction:
•
Voltex (Pty) Ltd;
•
Bidvest Afcom (Pty) Ltd;
•
Bidvest Buffalo Tapes
(Pty) Ltd;
•
G Fox & Co (Pty) Ltd;
•
Berzacks Brothers (Pty)
Ltd;
•
Home of Living Brands
(Pty) Ltd;
•
Sanlic House of Locks;
•
Plumblink (Pty) Ltd; and
•
Tuning Fork (Pty) Ltd.
[6]
The abovementioned firms operate as distributors of various products
such as electric power tools, general tools and hardware,
locks,
water pumps and generators.
Primary
target firm
[7]
The primary target firm is Brandcorp, a firm incorporated in
accordance with the company laws of the Republic of South Africa.
Brandcorp is controlled by Ethos Private Equity Fund V ("Ethos
V").
[8]
Brandcorp has six business divisions (i.e. Matus, Renttech SA,
Burncrete, lnterbrand, Moto Quip & Leisure Quip and MIC),
that
supply and distribute branded and nice consumer and industrial
products and consumer goods including generators, water pumps,
general tools and hardware, table and kitchenware and other products.
Proposed
transaction and rationale
[9]
In terms
of
the
Sale
of
Shares
and
Claims
Agreement,
Bidvest
will
acquire
100%
of the issued shares in
and
claims on loan
accounts
against
Brandcorp from its shareholder Ethos V.
[1]
[10]
Bidvest submitted that the proposed transaction provides significant
opportunities for the merging parties to significantly
grow revenue
and earnings by
inter
alia
leveraging off each
other's expertise, resources and extensive network.
[11]
From the seller's perspective, the proposed transaction is an
opportunity for Ethos V to sell its interest in Brandcorp and
realise
its investment on behalf of Ethos V's investors.
Impact
on competition
[12]
Bidvest and Brandcorp are both distributors of various products which
are used for different purposes in numerous industries
such as
agricultural, construction, engineering, industrial and mining.
[13]
The Competition Commission ("Commission") identified
horizontal overlaps between the activities of the merging parties
in
the wholesale and distribution of the following products: (i)
electric power tools; (ii) general tools and hardware; (iii) locks;
(iv) water pumps; (v) generators; (vi) fasteners and fittings; (vii)
tapes; (viii) table and kitchenware; (ix) personal protective
clothing; and (x) general lighting.
[14]
We note that Bidvest and Brandcorp are not involved in the
manufacturing of these products. They source these products from
South African manufacturers; those products that are not manufactured
in South Africa are imported from countries such as China,
Italy,
Germany and Europe.
[15]
The merging parties furnished the Commission with best estimates of
their market shares in each of the abovementioned
wholesale/distribution
markets and the Commission conducted its own
market investigation.
[16]
The market share data submitted by the merging parties indicate that
their post merger combined national market shares
would be below
20% in all of the abovementioned wholesale/distribution markets,
except in the wholesale/distribution of general
tools and hardware
where their combined national market share would be below 25%.
[17]
Customers contacted by the Commission confirmed that there are
alternative wholesalers/distributors for all the products in
question.
[18]
Based on the above market shares and the views of third parties,
including customers, the Commission concluded that the proposed
transaction is unlikely to substantially prevent or lessen
competition in any of the relevant wholesale/distribution markets.
[19]
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
[20]
The
merging
parties submitted that
except
for two
senior
executives
of
Brandcorp
whose
employment
contracts
will
be
terminated,
there
will
be
no
further
merger
specific
retrenchments.
[2]
[21]
The proposed transaction further raises no other public interest
concerns.
Conclusion
[22]
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 significant public interest issues
arise from the proposed transaction. Accordingly, we
approve the
proposed transaction unconditionally.
08
September
2016
DATE
_______________________
Mr
Andreas Wessels
Ms
Medi
Mokuena
and
Ms Andiswa
Ndoni concurring
Tribunal
Case Manager : Kameel Pancham
For
Bidvest
: Natalia Lopes of ENSAfrica
For
Brandcorp
: Shawn Van der Meulen and
Sarah Manley of Webber Wentzel
For
the Commission : Zanele Hadebe
[1]
This
merger
was
previously
notified to the competition
authorities
in
2012, but the merging parties never concluded the transaction.
[2]
Merger
Record,
inter
alia
page
38.