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[2018] ZACT 66
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D Capital Fund 1 (Pty) Ltd v Proconics (Pty) Ltd (LM117Jul18) [2018] ZACT 66 (30 August 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM117Jul18
In
the matter between
D
Capital Fund 1 (Pty)
Ltd
Primary Acquiring Firm
And
Proconics
(Pty)
Ltd
Primary Target Firm
Panel
: Ms A Ndoni (Presiding Member)
: Prof. Valodia (Tribunal Member)
: Prof. F
Tregenna (Tribunal Member)
Heard
on
: 1 Aug 2018
Order
Issued on : 1 Aug 2018
Reasons
Issued on : 30 August 2018
REASONS
FOR DECISION
Approval
[1] On
1 August 2018, the Competition Tribunal ('Tribunal")
unconditionally
approved the proposed transaction in terms of which D
Capital Fund 1 (Pty) Ltd ("the Fund") is acquiring control
over
Proconics (Pty) Ltd ("Proconics").
[2] The
reasons for the approval of the proposed transaction follow.
Parties
to the transaction
Primary
Acquiring Firm
[3] The
acquiring firm is the Fund, a private company incorporated under the
laws
of South Africa. The Fund is jointly controlled by Dlondlobala
Capital (Pty) Ltd ("Dlondlobala Capital") and Corvest 200
(Pty) Ltd ("Corvest 200"), with a 55%/45% equity interest
respectively. Dlondlobala Capital is not controlled by any
firm.
[1]
Corvest 200 is controlled by RMB Private Equity Holdings ("RMB"),
which is in tum controlled by First Rand Investment
Holdings (Pty)
Ltd ("First Rand lnvestmenr) . First Rand Investment is a
wholly-owned subsidiary of First Rand Ltd ("First
Randn).
[4]
The Fund controls Capital Agri Fund 1 (Pty) Ltd, an investment
vehicle seeking to
invest in agricultural investments. In addition to
the Fund, Dlondlobala Capital controls Rudan Engen 1 Stop Shop (Pty)
Ltd, and
has a 28.36% equity interest in Proconics.
[5]
The abovementioned firms will hereunder be referred to as the
"acquiring group".
The acquiring group is active in the
private equity sector, predominantly focused on,
inter alia,
diversifying its portfolios by investing in unlisted companies
and participating in management buy-outs and buy-ins.
Primary
Target Firm
[6]
The primary target firm is Proconics, a private company incorporated
under the laws
of South Africa. Proconics is not controlled by any
firm, nor does it control any firm. The shareholders of Proconics
are: (i)
Elizabeth Moolman
("Ms
Moolman•) with a 41.45%
shareholding; (ii) Dtondlobala Capital with a 28.36% shareholding;
(iii) Roland Matthysen Family Trust
("RMFT") with a 28.36%
shareholding; and
(iv)
Melvin
Keith Jones
(“Mr
Jones”
with a1.83%shareholding.
[7]
Proconics is an electrical and instrumentation,
control and
mechanical engineering and design company that also offers
Engineering Procurement and Construction (EPC)
[2]
services.
Proposed transaction and
rationale
[8] The
proposed transaction aims to facilitate a management buyout. The
management
buyout will be effected by a number of steps that will see
the Proconics management acquire control of Proconics. Ultimately,
the
Fund intends to acquire 49% of the issued share capital in
Proconics. Post merger, Proconics will be ultimately jointly
controlled
by the Fund and the Proconics management.
Relevant
market and impact on competition
[9] The
Competition Commission (“Commission”) found that the
proposed
transaction does not result in a horizontal overlap between
the merging parties' activities. This is because no firm in the
acquiring
group is active in the market for the provision of
engineering specialist services, detailed engineering and design and
construction
management services. The Commission further found that
there is a pre-existing relationship between the merging parties.
This is
due to the fact that the acquiring group already has an
equity interest in Proconics.
[10] The
Commission therefore concluded that the proposed transaction is
unlikely to lead to
a substantial prevention or lessening of
competition in any relevant market. The Commission further concluded
that the nature of
the proposed transaction makes it unlikely for it
to alter the structure of any market. We concur with the Commission's
conclusion.
Public interest
[11] The
merging parties confirmed that the proposed transaction will not have
any adverse effects
on employment.
[3]
The proposed transaction raises no other public interest concerns.
Conclusion
[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.
Ms
Andiswa Ndoni
Prof.
Imraan Valodia and Prof. Fiona Tregenna concurring.
30/08/2018
Date
Tribunal
Case Manager
: Kgothatso
Kgobe
For
the Merging Parties
: I Dlhadlha
of Bowmans
For
the Commission
: Z Siyo
[1]
Its shareholders consist of nine individuals and one trust, each not
holding more than
14.28%
shareholding
[2]
An EPC is a form of contracting arrangement where the EPC contractor
is responsible for all the activities from design, procurement,
construction to commission and handover of the project to the
customer.
[3]
Commission's report, page 14 and page 44 of the Merger Record.