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[2016] ZACT 77
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Fruit and Veg City (Pty) Ltd v Butchery Businesses owned by various Glen Aire Close Corporations (LM036MAY16) [2016] ZACT 77 (15 September 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No:
LM036May16
In
the matter betwee
n
:
FRUIT
AND VEG CITY (PTY)
LTD
Acquiring Firm
And
BUTCHERY
BUSINESSES OWNED BY VARIOUS
GLEN
Target
Firm
AIRE
CLOSE CORPORAT
I
ONS
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 approved the large merger
between Fruit and Veg City (Pty) Ltd ('FVC') and Butchery
Businesses
owned by various Glen Aire Close Corporations ('Glen Aire
Butcheries') without conditions.
[2]
The reasons for the approval follow
.
PARTIES
TO THE TRANSACTION AND THEIR ACTIVITIES
Primary
Acquiring
Firm
[3]
The primary acquiring firm is FVC, a private company incorporated in
accordance with the laws of the Republic of South Africa.
FVC is a
wholly owned subsidiary of Fruit and Veg City Holdings (Pty) Limited
('FVC Holdings') which is in turn a wholly owned
subsidiary of Food
lovers Holdings (Pty) Ltd ('FLM Holdco'). FLM Holdco additionally
controls, among other subsidiaries, Rump and
Ocean Group ('R&O
Group') and Fresher's Meat Packers (Pty) Ltd ('Freshers'), which
operate as the butchery offering in some
of the stores trading as
Fruit and Veg City ('FVC store') or Food Lovers Markets ('FLM
store').
[4]
The subsidiaries of FLM Holdco, which include FVC and FLM stores, are
involved in services such as wholesaling, distribution,
and the
retailing of fresh produce, groceries, beverages and other food
related and ancillary products to end customers.
Primary
Target Firm
[5]
The
Glen
Aire
butchery
businesses
are
owned
by
a
number
of
close
corporations
within
the
Glen
Aire
Group,
[1]
wholly
owned
by
either
Antonio
Paivia
Teixera
or
Silva Teixera.
[2]
These
businesses
are located across
South
Africa,
are
involved
in
the
sale
of
meat
and
chicken
products
to
retail
customers
and
operate
from
within
FLM
or
FVC
stores
owned
by
the
acquiring
firm or its
franchisees.
PROPOSED
TRANSACTION AND RATIONALE
[6]
The proposed transaction involves an acquisition by FVC of the target
businesses a going concern. Post transaction, the Glen
Aire
Butcheries will be wholly owned subsidiaries of FVC. Antonio Teixera
will be employed by FVC as an executive manager of FVC's
butchery
division.
[7]
The rationale for the acquisition of the Glen Aire Butcheries by FVC
presents an attractive investment opportunity, allowing
the FVC Group
to continue to grow and expand its butchery offering. In addition the
FVC Group will ensure product consistency in
the commensurate to the
brand of the Food Lover's Market.
[8]
The Glen Aire Butcheries consider the disposal of the businesses
necessary to settle debts and improve their cashflow. In addition
it
provides the opportunity to widen their footprint on the South
African region and improve their administration by operating
from
within the FVC group.
RELEVANT
MARKETS AND IMPACT ON COMPETITION
[9]
In its analysis, the Commission found a horizontal overlap in
the market for the retail of meat, pork and chicken products,
a
component of the food category in the market for retail grocery
products. This overlap is due to the fact that in certain
FVC and FLM
stores, the in-store butcheries are owned and run by the R&O
Group or Fresher's, ultimately controlled by FLM Holdco.
[10]
This horizontal
overlap
does not
however present
a
threat
to
competition
because of the lack of geographic
overlap
between FVC and
FLM stores with butcheries
run
by
the
R&O
Group
or
Fresher's
and,
those
with
butcheries controlled by the Glen Aire
Group.
[11]
The Commission additionally considered the pricing effects of the
merger given that all the acquired butcheries will now be
controlled
by FLM Holdco. Pre-merger, there was no uniform pricing structure,
with each store and butchery therein setting its
own prices, taking
into account its competitive environment. Indicative of this model is
that prices currently differ between those
stores with R&O Group
butcheries and those stores with Fresher's controlled butcheries. The
presence of competitors in the
market influences prices. Given that
the majority of the Glen Aire Butcheries are situated in areas
wherein there is strong competition,
we find it unlikely that the
current pricing model will change.
[12]
The proposed merger thus does not present anti-competitive threats to
the market for the retail of meat, pork and chicken products.
CONCLUSION
[13]
Although presenting horizontal overlaps in the market for the retail
of meat, pork and chicken products, the lack of geographic
overlap
renders the effects of such market overlap nugatory.
[14]
The proposed transaction does not raise any public interest concerns
.
[15]
Accordingly, we approved the transaction without conditions
.
15
September 2016
Date
_______________________
Ms.
Medi Mokuena
Anton
Roskram and Andiswa Ndoni concurring
Tribunal
Researcher:
Alistair Dey-Van Heerden
For
the Merging Parties: Albert
Aukemer of Cliffe Dekker Hoffmeyr
For
the Commission:
Rakgole Mokolo
[1]
These
CC's are Glen Aire Hyper Meat & Chicken: Hillfox, Bloemfontein,
Tygervalley, Welkom, Newton Park PE, Fig Tree PE, Kempton
Park,
Klerksdorp, Uitenhage, Fourways, Kimberly, East
London,
Secunda,
Richards
bay
,
Vanderbijlpark
,
Westgate
Mall,
Benoni.
[2]
A couple conducting their business activities collectively and in
collaboration with one another.