compet/t/on tribunal
, •• ,, r1f r l1•
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM174Nov16
In the matter between:
KOMATSU AMERICA CORP. Primary Acquiring Firm
and
JOY GLOBAL INC.
Panel
Heard on
Order Issued on
Reasons Issued on
Approval
Primary Target Firm
: Ms Andiswa Ndoni (Presiding Member)
: Prof lmraan Valodia (Tribunal Member)
: Mr Enver Daniels (Tribunal Member}
: 08 February 2017
: 08 February 2017
: 22 February 2017
Reasons for Decision
[1] On 8 February 2017, the Competition Tribunal ("Tribunal") approved the
proposed transaction between Komatsu America Corp ("Komatsu") and Joy
Global Inc ("Joy Global"}.
[2] The reasons for approving the proposed transaction follow.
1
Parties to the Proposed Transaction
Primary Acquiring Firm
[3] The primary acquiring firm is Komatsu. Komatsu is a firm incorporated in
accordance with the laws of the United States of America and is a wholly owned
subsidiary of Komatsu Limited, a company incorporated in accordance with the
laws of Japan.
[4] Komatsu Limited, a public company listed on the Tokyo Stock Exchange, is the
ultimate parent company of the Komatsu group of companies, collectively
referred to as the ("Komatsu Group").
[5] The Komatsu Group is active in South Africa through its control of Komatsu Africa
Holdings (Pty) Ltd ("Komatsu Holdings"); Komatsu South Africa (Pty) Ltd
("Komatsu SA"); Modular Mining Systems (Pty) Ltd ("MMSA") and Komatsu
Development Trust ("Komatsu Trust"). Komatsu SA is the most important
operating subsidiary of the Komatsu Group in South Africa. Most relevant to the
transaction before the Tribunal is Komatsu SA.
[6] In South Africa, Komatsu SA is active in the importing, sales and service of
construction and mining equipment. It does not undertake any manufacturing
activities in South Africa and it supplies and services only surface mining
equipment.
Primary Target Firm
[7] The primary target firm is Joy Global, a firm incorporated in accordance with the
laws of the United States of America and is not controlled by any single
shareholder or firm.
[8] In South Africa, Joy Global controls Joy Global (Africa) (Pty) Ltd ("Joy Africa").
Almost all of Joy Global's sales in South Africa are made through Joy Africa, with
a minimal amount being made by Joy Global directly.
2
[9] Joy Africa is active in the sale and service of both surface and underground
mining equipment. It also manufactures underground mining products in South
Africa.
Proposed Transaction and Rationale
[1 O] Komatsu intends to acquire 100% of the issued shares in Joy Global. Post
transaction, Komatsu will have sole control of Joy Global, which will operate as
a separate subsidiary of Komatsu.
[11] In terms of the rationale, Komatsu submits that the proposed transaction will
enable it to expand its mining equipment offering by supplementing its currently
limited line of surface mining equipment with Joy Global's underground mining
equipment and certain surface mining equipment which Komatsu does not
presently offer. As a result the merged entity is able to offer customers a wider
choice, a better and more efficient service network as well as prospects to
develop new products.
Relevant Market and Impact on Competition
[12] The Commission considered the South African activities of the firms and
concluded that while Joy Africa is active in the manufacture and supply of both
surface and underground mining activities, Komatsu SA is active in the supply of
surface mining equipment only and does not undertake any manufacturing
activities in South Africa. The analysis was therefore limited to the provision of
surface mining equipment.
[13] In accordance with the approach adopted in Bucyrus Africa Underground (Pty)
Ltd and Barloworld South Africa (Pty) Ltcf1 the Commission analysed narrower
markets where each kind of mining equipment was investigated as a separate
product market. The Commission concluded that the relevant markets to be
analysed for the proposed transaction are the national markets for, firstly, mining
1 29/LM/Mar12 and 27/LM/Mar12.
3
wheel loaders, secondly, hydraulic breakers and, thirdly, ground engaging tools
("GET").
[14] In the market for mining wheel loaders, the Commission found that mining wheel
loaders are segmented by their size and that the different sizes of wheel loaders
are not substitutable. The mining wheel loaders offered by Joy Global and
Komatsu are different sizes and as such the Commission concluded that the
mining wheel loader activities of the merging parties do not overlap.
[15] In the market for hydraulic breakers and GET the Commission found that the
proposed transaction results in a horizontal overlap in the provision of hydraulic
breakers and GET. While the Commission was unable to obtain readily available
data on the size of each market, it was able to find, based on third-party
submissions that the merging parties are not big players in each market and will
continue to face competition from several players post the proposed transaction.
[16] Accordingly, the Commission concluded that the proposed transaction is unlikely
to substantially prevent or lessen competition in the relevant market. We concur
with this finding.
Public Interest
[17] The Commission is of the view that the proposed transaction is unlikely to
negatively affect employment as the Komatsu Group does not intend to integrate
the two firms at this stage.2
[18] No other public interest concerns arise from the proposed transaction.
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.
2 Merger Record, page 88.
4
22 February 2017
DATE
Prof lmraan Valodia and Mr Enver Daniels concurring
Tribunal Researcher:
For the merging parties:
For the Commission:
Hayley Lyle
Robert Wilson of Webber Wentzel for the target firm
and Tamara Dini of Bowman Gilfillan for the acquiring
firm.
Nolubabalo Myoli
s