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[2018] ZACT 36
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AECI Limited v Much Asphalt (Pty) Ltd (LM234Nov17) [2018] ZACT 36 (20 April 2018)
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case
No: LM234Nov17
In
the matter between
AECI
Limited
Primary Acquiring Firm
And
Much
Asphalt (Pty)
Ltd
Primary Target Firm
Panel
: Yasmin Carrim (Presiding Member)
: lmraan
Valodia (Tribunal Member)
: Andreas
Wessels (Tribunal Member)
Heard on
: 28 March 2018
Order Issued on :
28 March 2018
Reasons Issued on
: 20 April 2018
REASONS
FOR DECISION
Approval
[1]
On
28 March 2018, the Competition Tribunal
("Tribunal")
unconditionally approved the
proposed transaction in terms of which AECI Limited
("AECI")
is acquiring control over Much
Asphalt (Pty) Ltd
("Much
Asphalt" ).
[2]
The
reasons for the approval of the proposed transaction follow.
Primary Acquiring Firm
[3]
AECI
is a company listed on the JSE, and is not controlled by any single
firm. AECI controls a number of firms including AECI Mining
Solutions
Limited and African Explosives International Limited. AECI and its
subsidiaries are hereafter referred to as the "AECI
group".
[4]
The
AECI group is primarily focused OQ explosives and specialty
chemicals. The AECI group comprises of five primary business units,
inter alia,
mining
solutions, specialty chemicals and agrochemicals. The specialty
chemicals businesses remains core for AECI and comprises
numerous
firms, including Crest Chemicals (Pty) Ltd ("Crest Chemicals")
and Industrial Oleochemical Products (Pty) Ltd
("IOP").
Primary Target Firm
[5]
Much
Asphalt is collectively controlled by Capitalworks Funds and
Mineworkers Investment Company (Pty) Ltd.
[1]
Much Asphalt controls a number of firms including SprayPave (Pty) Ltd
("Spraypave") and East Coast Asphalt (Pty) Ltd
("ECA").
Much Asphalt and its subsidiaries are hereafter referred to as the
"Much Asphalt group". The Much
Asphalt group manufactures
and supplies hot and cold mix asphalt products, modified and
unmodified bituminous emulsions and binders.
Proposed
transaction and rationale
[6]
The
proposed transaction entails the acquisition of the entire issued
shares, and the shareholder claims in Much Asphalt. Upon
implementation of the proposed transaction, AECJ will exercise sole
control over Much Asphalt.
[7]
The
Competition Commission ("Commission") found that there is
no horizontal overlap between the activities of the merging
parties
because the Much Asphalt group is a manufacturer and supplier of
asphalt and bitumen products and none of the firms in
the AECI group
supply any asphalt or bitumen products, nor do they supply or
manufacture any products that can be regarded as substitutes
for such
products.
[8]
After
the Commission had completed its investigation and recommended an
approval to the Tribunal the representatives of the merging
parties
became aware of and advised the Commission that a vertical
relationship existed between the merging parties. As a result,
the
approval of the proposed transaction was delayed. The merging parties
had to make submissions in order to facilitate further
investigations
by the Commission.
[9]
The
merging parties submitted that Crest Chemicals, a subsidiary of AECI,
supplied caustic soda and hydrochloric acid to Spraypave.
Another
subsidiary of AECI namely IOP sold bitumen emulsifiers and fluxing
agents to ECA.
[2]
The merging parties further submitted that the vertical relationship
is limited as the sales are negligible as they constitute
less than
0.01% of AECl's turnover and 0.05% of its Chemical unit.
[3]
The Commission perused the merging parties' submissions and found
that IOP and Crest Chemicals have relatively high market shares
in
the upstream market for the supply of bitumen emulsifiers. However,
the Commission is of the view that due to the target group's
low
market shares in the downstream market, the AECI group's capacity to
supply bitumen emulsifiers would not be absorbed and that
they could
still supply other firms in the downstream market. The Commission
submitted that the vertical relationship will not
result in
foreclosures or facilitate coordination in the markets, therefore it
is unlikely to substantially prevent or lessen competition.
[10] The Tribunal notes
that Much Asphalt has been implicated in two complaints by the
Commission relating
to market allocation/division, collusive
tendering and price fixing.
[4]
The merging parties submitted that the underlying complaints date
back to when Much Asphalt was owned by Murray & Roberts and
they
have since been acquired by the consortium led by Capital Works, with
the legal entity remaining under the ownership of Murray
&
Roberts.
[5]
In the
Robin Frank v Much Asphalt
complaint, Much Asphalt (old Much
Asphalt) is the leniency applicant, and the merging parties were not
in a position to comment
on the second complaint because they do not
represent the old Much Asphalt. They nevertheless assured the
Tribunal that they have
a competition law compliance programme in
place to assuage any concerns about future conduct.
Public
interest
[11]
The
merging parties confirmed that the proposed transaction will not
result in any retrenchments, and due to the lack of overlapping
activities, there will be no duplications of jobs as a result of the
proposed transaction. The proposed transaction raises no other
public
interest concerns.
[12]
In
light of the above, we concluded 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 approved the proposed
transaction unconditionally.
Prof
. Imraan Valodia
Ms
Yasmin Carrim and Mr Andreas Wessels concurring.
20
April 2018
Tribunal Case Manager:
Aneesa Ravat
Kgothatso Kgobe
For
the Merging Parties : R van
Rensburg of ENS Africa
D Dingley of Webber Wentzel
For
the Commission
: B Ntshingila and G Mutiza
[1]
The remaining shareholding is held by the members of Much Asphalt
management.
[2]
Merging parties' submissions marked as "Annexure A", at
page 3.
[3]
Merging parties' submissions marked as "Annexure A", at
page 2.
[4]
The cases were referred in 2014 and 2016 respectively and are
awaiting adjudication
(Robin Frank
v
Much Asphalt
and
More Asphalt
2009FEB4277/ CC v
Much Asphalt, Roadspan
and
Roadmac
2011NOV0376.)
[5]
Transcript, page 10.