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[2016] ZACT 76
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Afgri Equipment (Pty) Ltd v Agrico (Pty) Ltd (LM031MAY16) [2016] ZACT 76 (15 September 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:LM031May16
In the
matter between:
AFGRI
Equipment
(Pty)
Ltd
Primary Acquiring Firm
and
AGRICO
(Pty)
Ltd
Primary Target Firm
Panel
: Medi Mokuena (Presiding Member)
: Anton Roskam (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard
on
: 24 August 2016
Order
Issued on
: 24 August 2016
Reasons
Issued on
: 15 September 2016
Reasons
for Decision
Approval
[ 1 ] On
24 August 2016, the Competition Tribunal ("Tribunal")
unconditionally approved the large merger between AFGRI
Equipment
Proprietary Limited ("AFGRI Equipment") and AGRICO
Proprietary Limited ("AGRICO"). The reasons for
approving
the proposed transaction follow.
Parties
to the transaction
[ 2 ] The
primary acquiring firm is AFGRI Equipment. AFGRI Equipment is a 100%
subsidiary of and controlled by AFGRI Operations
Proprietary Limited
("AFGRI Operations"). AFGRI Operations is indirectly
controlled by AFGRI Holdings Proprietary Limited
(AFGRI Holdings).
AFGRI Holdings and all its subsidiaries that are incorporated
in South Africa will collectively be referred
to as "AFGRI
Group". AFGRI Group is involved in the agricultural commodity
business.
[ 3 ]
AFGRI Equipment is part of the Retail and Mechanization division.
AFGRI Equipment mainly supplies John Deere agricultural
equipment and
accessories. It also supplies complementary agricultural products of
other brands such as Lemken and Falcon. AFGRI
Equipment mainly
supplies its products to the Free State, Mpumalanga, Gauteng and
Limpopo Provinces.
[ 4 ] The
primary target firm is Agrico Proprietary Limited (AGRICO) a wholly
owned subsidiary of Agrico Machinery Proprietary
Limited (AGRICO
Machinery). AGRICO is a main supplier of John Deere agricultural
equipment and accessories. AGRICO supplies complementary
products of
other brands such as JCB, Grimme, Goldoni, Eurospand and Siloking
amongst others. AGRICO mainly focuses its supplies
to farmers in the
Western Cape Province.
Proposed
transaction and rationale
[ 5 ]
AFGRI Equipment intends to acquire the business of AGRICO. This
acquisition entails the sale of assets and liabilities, which
is
embodied in the Sale of Business Agreement. This acquisition includes
all the AGRICO branches situated in the Western Cape Province.
[ 6 ]
AFGRI Equipment wants to expand its business where it does not have a
presence in the Western Cape Province. AGRICO on the
other hand wants
to dispose off the business to realise its investment and focus on
its core businesses.
Impact
on competition
[ 7 ] The
proposed transaction gives rise to a horizontal overlap.
[ 8 ] The
Competition Commission ("the Commission") identified the
relevant product market as the market for the retail
distribution of
agricultural equipment in South Africa. The post-merger market share
for the proposed transaction is less than
15%. The Commission thus
found that the proposed transaction is unlikely to result in a
substantial lessening of competition in
any market. However the
Commission noted that the merging parties are both John Deere
appointed dealerships who are encouraged
to focus their sales within
certain areas as allocated by their John Deere agreements. Also, the
Commission noted that this is
an industry-wide phenomenon, which is
carried out by other upstream operators who are in competition with
John Deere. The Commission
also found that with or without the
proposed transaction this phenomenon will continue post-merger. The
merging parties during
the hearing also confirmed this and submitted
that the John Deere market allocations are not merger specific and
will continue
throughout South Africa absent of this merger.
[
9 ]
We agree with the Commission's competition assessment that
the proposed transaction is unlikely to substantially prevent or
lessen
competition in any relevant market.
Public
interest
[
10
]
The merging
parties submitted that the proposed transaction will not result in an
adverse impact on employment. The proposed transaction
further raises
no other public interest concerns.
Conclusion
[
11 ]
In light of the above, we conclude
that the proposed transaction is unlikely to substantially prevent or
lessen competition in the
identified market. In addition, no public
interest issues arise from the proposed transaction. Accordingly, we
approve the proposed
transaction unconditionally.
15
September 2016
DATE
_____________________
Ms
Medi Mokuena
Mr
Anton Roskam and Ms Andiswa Ndoni concurring
Tribunal
Researcher:
Caroline Sserufusa
For the
merging parties: Shaun Van
Der Meulen of Webber Wentzel
For the
Commission:
Maanda Lambani