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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM113Sep16
In the matter between:
Steinhoff International Holdings N.V Primary Acquiring Firm
and
Tekkie Town (Pty) Ltd
Panel
Heard on
Order Issued on
Reasons Issued on
Approval
Primary Target Firm
: Norman Manoim (Presiding Member)
: Mondo Mazwai (Tribunal Member)
: Medi Mokuena (Tribunal Member)
: 23 November 2016
: 23 November 2016
: 14 December 2016
Reasons for Decision
[ 1 ] On 23 November 2016, the Competition Tribunal ("Tribunal") unconditionally
approved the merger between Steinhoff International Holdings N.V ("Steinhoff") and
Tekkie Town (Pty) Ltd ("Tekkie Town").
[ 2 ] The reasons for approving the proposed transaction follow.
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Parties to transaction
Primary acquiring firm
[ 3] The primary acquiring firm is Steinhoff, a company listed on the Frankfurt Stock
Exchange and the JSE Limited. It is not controlled by any firm. In South Africa,
Steinhoff controls a number of firms but of relevance to this transaction is its ultimate
control over Pepkor (Ply) Ltd ("Pepkor"). Pepkor controls Ackermans (Pty) Ltd, Pep
(Ply) Ltd, Shoe City Holding (Pty) Ltd, JD Group International (Pty) Ltd and Pepkor
Specialty Stores (Pty) Ltd.
[ 4 ] Steinhoff is a diversified international value and discount retailer which is active in a
number of industries ranging from furniture to building materials. Pepkor through the
companies it controls is active in the retail market primarily involving clothing with
ancillary activities in the retail market for shoes.
Primary target firm
[ 5] The primary target firm, Tekkie Town is controlled by Actis 4 PPC ("Actis") and AJVH
Holding (Ply) Ltd ("AJVH"). Actis is advised by Actis Africa 4 LP which is a private
equity investment fund managed by Actis GP LLP. Actis GP LLP is advised by Actis
LLP which is a limited liability partnership. AJVH is controlled by the Sport City Trust
whose trustees are AJ van Huyssteen, BE Mostert and D Pretorius.
[ 6] Tekkie Town is a retail store which sells branded sport and leisure footwear in
approximately 300 stores located across South Africa. In addition but in a limited
respect Tekkie Town also sells accessories, apparel and cell-phone airtime vouchers.
Proposed transaction and rationale
[ 7 ] The proposed transaction involves Steinhoff acquiring 100 percent of the ordinary
issued shares in Tekkie Town. As a result of the proposed transaction, Steinhoff will
control Tekkie Town.
[ 8 ] Steinhoff submitted that the proposed transaction is an attractive business for it and
would be a good strategic fit for its group. Tekkie Town submitted that the proposed
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transaction presented it with an opportunity to gain exposure to a broader range of
value retail brands and would allow its employees to broaden their career
opportunities within the Steinhoff Group.
Impact on competition
[ 9 ] According to the Competition Commission's ("the Commission") findings the
proposed transaction does not result in a substantial lessening of competition for
reasons which follow.
[ 10] The Commission considered the activities of the merging parties and found a
horizontal overlap in the broad market for the retail of footwear. However the
Commission delineated the market further as Tekkie Town only sells branded
footwear whereas Pepkor sells unbranded footwear1. It therefore came to the
conclusion that, in the market for branded footwear, the proposed transaction would
result in a minimal market share accretion of less than 1 percent and would continue
to be constrained by other competitors in the market such as Sportsman's Warehouse
and Total Sport.
[ 11 ] The Commission also identified a potential foreclosure concern as the distribution
network of Tekkie Town is outsourced to Revert Risk Management Solutions ("RTT")
whereas the distribution services of the Pepkor Group is done in-house. The
Commission found that there is no risk for foreclosure as Tekkie Town's business
model and operations would not change post-transaction. Further, the current contract
in place between RTT and Tekkie Town would last for the next five years. Additionally,
RTT only derives approximately two percent of their annual turnover for logistical
services provided to Tekkie Town.
[ 12] In the absence of facts to the contrary, we concur with the Commission's competition
assessment, i.e. that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market.
1 Even on a conservative approach using the broadly defined market of footwear in general this
1 Even on a conservative approach using the broadly defined market of footwear in general this
transaction does not present any competition concerns as the market share would be minimal at less
than 5 percent See inter alia merger record page 119.
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Public interest
[ 13 ] The merging parties confirmed that the proposed transaction will not result in an
adverse impact on employment.2 The proposed transaction further raises no other
public interest concerns.
Conclusion
[ 14] 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
Mr Nor Manoim
Ms Mondo Mazwai and Ms Medi Mokuena concurring
Tribunal Researcher: Aneesa Ravat
For the merging parties: Lizel Blignaut of ENS Africa
14 December 2016
DATE
For the Commission: Billy Mabatamela, Lindiwe Khumalo and Kholiswa Mnisi
2 Inter alia merger record page 15.
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