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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM041May18
In the matter between
VKB Agri Processors (Pty) Ltd Primary Acquiring
Firm
And
VKB Flour Mills (Pty) Ltd
Primary Target
Firm
Approval
[1] On 13 June 2018, the Competition Tribunal (“the Tribunal”) unconditionally
approved the large merger between VKB Agri (Pty) Ltd (“VKB Agri”) and VKB
Flour Mills (Pty) Ltd (“VKB Flour”).
[2] The reasons for the approval follow.
Panel : Ms Mondo Mazwai (Presiding Member)
: Mrs Medi Mokuena(Tribunal Member)
: Prof Fiona Tregenna (Tribunal Member)
Heard on : 13 June 2018
Order Issued on : 13 June 2018
Reasons Issued on
: 10 July 2018
REASONS FOR DECISION
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Parties to the transaction and their activities
Primary acquiring firm
[3] The primary acquiring firm is VKB Agri, currently the majority holder of VK B
Flour.
[4] VKB Agri is a wholly owned subsidiary of VKB Bellegings (Edms) Bpk (Pty) Ltd
(“VKB Bellegings”). VKB Bellegings is a widely held company and is thus not
controlled by any single shareholder. VKB Bellegings, VKB Agri and all of their
subsidiaries in South Africa are further referred to as the “VKB Group”. The VKB
Group has a diverse range of interests in the agricultural sector, ranging from
maize milling to research and development of seed technology.
Primary target firm
[5] The primary target firm is VKB Flour, a manufacturer of wheat flour, bread and
other bakery products. VKB Flour is majority owned by VKB Agri with Louis
Dreyfus Commodities Africa (Pty) Ltd (“LDCA”) as a minority shareholder.
Proposed transaction and rationale
[6] In terms of the proposed transaction, VKB Agri intends to acquire the remaining
interest in VKB Flour from LDCA, becoming the sole owner and controller.
[7] LDCA wishes to dispose of its interest in VKB Flour as VKB Flour does not form
part of its core business and LDCA does not lead the operations.
Relevant market and impact on competition
Horizontal assessment
[8] The Competition Commission (“The Commission”) evaluated the effect of the
proposed transaction on the market for the manufacture and supply of wheat
flour and bread products. The transaction does not change the structure of the
relevant market as VKB Agri already holds a controlling majority interest in the
target firm. The transaction simply removes LDCA’s minority protection rights,
conferring unfettered sole control of VKB Flour onto VKB Agri.
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[9] Furthermore, the Commission is of the view that the proposed transaction is
pro-competitive as it removes structural links between VKB Agri and LDCA who
are competitors in the maize milling market.
[10] We accordingly agree with the Commission’s analysis.
Public interest
[11] The merging parties submitted that the proposed transaction will have no
negative impact on employment, as the target firms will continue to operate as
is post -merger. The employee representatives of VKB Flour , the Food and
Allied Workers Union, were contacted by the Commission regarding the
transaction and did not raise any concerns.
[12] The proposed transaction further raised no other public interest concerns.
Conclusion
[13] 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 out of the merger . Accordingly, we approve the
proposed transaction unconditionally.
10 July 2018
Ms Mondo Mazwai Date
Mrs Medi Mokuena and Prof Fiona Tregenna
Tribunal Researcher:
Jonathan Thomson
For the merging parties
Daryl Dingley of Webber Wentzel
For the Commission:
Tumiso Loate