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[2018] ZACT 31
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Overberg Agri Limited v Acorn Agri (Pty) Ltd (LM288Feb18) [2018] ZACT 31 (28 March 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: LM288Feb18
In
the matter between
Overberg
Agri
Limited
Primary Acquiring Firm
And
Acorn
Agri (Pty)
Ltd
Primary Target Firm
Panel
:
Yasmin Carrim (Presiding Member)
: Medi
Mokuena (Tribunal Member)
: Fiona
Tregenna (Tribunal Member)
Heard
on
: 14 March 2018
Order
Issued on : 14 March 2018
Reasons
Issued on : 28 March 2018
REASONS
FOR DECISION
Approval
[1]
On
14 March 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction involving Overberg
Agri Limited ("Overberg") and Acorn Agri (Pty) Ltd
("Acorn"), hereinafter collectively referred to as the
merging parties.
[2]
The
reasons for approval of the proposed transaction follow.
Primary Acquiring Firm
[3]
Overberg
is an investment holding company that focuses on investments in
agricultural and related sectors in South Africa. Its shares
are
widely dispersed and as such no single shareholder controls Overberg.
Overberg controls six firms in South Africa including
Overberg Agri
Bedrywe (Pty) Ltd ("OA Bedrywe"), through which it conducts
most of its business.
[1]
Overberg and all the firms directly and indirectly controlled by it
are hereinafter collectively referred to as the 'Overberg Group'.
[4]
The
Overberg Group supplies agricultural products and services primarily
in the Western and Eastern Cape Province. The Overberg
Group operates
through four divisions namely grain services, mechanisation, retail
services, and financial and insurance services.
The retail division
sells and distributes packaging material, animal feed and fertilisers
through their retail stores. Agricultural
equipment (machinery and
parts) is sold through their mechanisation division. The Overberg
Group also provides financial and insurance
services to farmers,
which includes the provision of credit.
Primary Target Firm
[5]
Acorn
is an investment holding company that invests in unlisted companies
operating in the food and agricultural sector in Southern
Africa. No
single shareholder controls Acorn. Acorn directly and indirectly
controls Montagu Dried Fruit and Nuts (Pty) Ltd, Acorn
Agri Services
Ltd, Grassroots Group Holdings (Pty) Ltd ("Grassroots"),
and ACG Fruit (Pty) Ltd, hereinafter collectively
referred to as the
'Acorn Group'.
[6]
The
Acorn Group farms table grapes and citrus crops. It also sources and
distributes dried fruits, nuts and dried fruit products.
[7]
In
terms of the
Amalgamation
Agreement,
[2]
the proposed transaction entails
Overberg and Acorn merging their businesses with Overberg being the
surviving entity thereafter.
Effectively, Overberg would be in
control of Acorn's subsidiaries and operations.
[8]
The
envisaged process entails Overberg acquiring all of Acorn's assets,
hereinafter referred to as the 'Sale Assets'.
[3]
As consideration for the Sale Assets, Overberg: (i) will assume
Acorn's liabilities; and (ii) will issue two sets of shares to
Acorn
shareholders and Acorn respectively.
[9]
The
first set of shares to be issued by Overberg will account for
approximately 99% of the consideration shares Overberg undertook
to
issue. The shares will be issued directly to the Acorn shareholders
on the date of implementation of the merger with the objective
that
the Acorn shareholders will become direct shareholders in Overberg.
[10] The second set of
consideration shares which are approximately 10 000 shares, will be
issued after
implementation of the merger. These shares will not be
issued directly to the Acorn shareholders, but to Acorn. They will in
turn,
be distributed by Acorn to its shareholders.
[11] In terms of the
agreement, Overberg may be obliged to issue additional shares in the
event that (1)
Grassroots achieves certain performance targets; or
(2) Overberg is in breach of any warranties given by it in terms of
the agreement.
[12] The Competition
Commission ("Commission") found no horizontal overlap
between activities
of the merging parties since the Overberg Group is
not active in the market for the farming of citrus and table grapes
nor the
market for the sale of dried fruits, nuts and ancillary
products thereof.
[13]
The
Commission therefore concluded that the proposed transaction was
unlikely to substantially prevent or lessen competition in
any
relevant market. We agreed with the Commission's conclusion.
Public
interest
[14]
The
merging parties confirmed that the proposed transaction would not
result in any retrenchments or job losses.
[4]
The proposed transaction raised no other public interest concerns.
Conclusion
[15]
In
light of the above, we concluded that the proposed transaction was
unlikely to prevent or lessen competition in any relevant
market. In
addition, no other public interest concerns arose from the proposed
transaction. Accordingly, we approved the proposed
transaction
unconditionally.
Ms
Yasmin Carrim
Mrs
Medi Mokuena and Fiona Tregenna concurring.
28 March 2018
Tribunal
Researcher:
Hlumelo Vazi
For
the Merging Parties:
P Neethling of Van
der Spuy and Partners Inc
For
the Commission:
T Loate
[1]
As Overberg Is an investment firm, it does not trade directly.
[2]
The proposed transaction is an amalgamation in terms of section 44
of the Income Tax Act 58 of 1962. Generally, the amalgamation
takes
place over a period of time and through various steps. However, this
particular transaction will take place over one day,
save for a few
further steps In the future. On the day it takes place, most of
Acorn's assets and liabilities will be delivered
to Overberg, hence
why it constitutes a merger for purposes of the
Competition Act 89
of 1998
.
[3]
The Sale Assets are the business operations of Acorn. Meaning its
subsidiaries, its interests in other firms, contracts etc
[4]
Merger Record, pages 13,149 and 150.