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[2018] ZACT 52
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Kaap Agri Bedryf Ltd v Patridge Building Supplies (Pty) Ltd t/a Underberg Forge (LM116Jul18) [2018] ZACT 52 (19 September 2018)
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case
No: LM116Jul18
In
the matter between
Kaap
Agri Bedryf
Ltd
Primary Acquiring Firm
And
Patridge
Building Supplies (Pty) Ltd t/a Underberg
Forge
Primary Target Firm
Panel
: Mr E Daniels (Presiding Member)
: Mr A
Roskam (Tribunal Member)
: Prof. F
Tregenna (Tribunal Member)
Heard
on
: 22 August 2018
Order
Issued on : 22 August 2018
Reasons
Issued on : 19 September 2018
REASONS
FOR DECISION
Approval
[1]
On
22 August 2018, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction in terms of
which
Kaap Agri Bedryf Ltd ("Kaap Agri Bedryf') will acquire control
over Patridge Building Supplies (Pty) Ltd t/a Underberg
Forge
("PBS").
[2]
The
reasons for the approval of the proposed transaction follow.
Parties
to the transaction
Primary Acquiring Firm
[3]
Kaap
Agri Bedryf is a wholly-owned subsidiary of Kaap Agri Ltd ("Kaap
Agri"). Kaap Agri Bedryf owns TFC Strand (Pty) Ltd,
Ventures
(Pty) Ltd, TFC Properties (Pty) Ltd, TFC Operations (Ply) Ltd and
Agriplas (Pty) Ltd. Kaap Agri Bedryf and its subsidiaries
are a
retail services group that supplies a variety of products and
services mainly to customers operating in the agricultural
sector,
and also to the general public.
[4]
Kaap
Agri Bedryf s product and services offering consists of retail stores
which sell,
inter alia,
farming
requisites, building materials, packaging materials and grain
handling. Kaap Agri Bedryf started out as an agriculture co-operative
in the Western Cape, but has extended its business operations and
opened branches in the Eastern Cape, Gauteng, and Mpumalanga,
among
other provinces (excluding KZN).
Primary Target Firm
[5]
PBS
is not controlled by any single firm. Its shareholders are Richard
Arthur Jardine, Patrick James Spence Reid, Matthews Robertson
and
Tertia Reid (the sellers).
[1]
PBS does not directly or indirectly control any other firm(s). PBS is
a supplier of products mainly to customers operating in the
agricultural sector, but also to the general public.
[6]
PBS
operates through three divisions: Forge Agri, Forge Build and Forge
Trans. Of relevance for the competition analysis in this
proposed
transaction is PBS' operations through Forge Agri and Forge Build.
[7]
Forge
Agri offers retail and bulk trade of,
inter
alia,
farming requisites, animal
health, handling products, dairy consumables and seeds. Forge Build
supplies a full range of hardware
products and building materials.
Forge Trans is the logistics division which, owns and operates trucks
which deliver varied loaded
sizes to customers of the former
divisions, mostly within a 100km radius. PBS supplies its products
and services in KZN.
Proposed
transaction and rationale
[8]
In
terms of the Sale
of Shares
Agreement,
Kaap Agri Bedryf intends
to acquire 60% of PBS' issued share capital. Upon implementation of
the proposed transaction, Kaap Agri
Bedryf will exercise control over
PBS.
Relevant
market and impact on competition
[9]
The
Competition Commission ("Commission") found that the
proposed transaction presents two horizontal overlaps. The first
is
in respect of the retailing of agricultural input products and
services; and the second is in the market for the supply of building
materials.
[10] The merging
parties submitted that the geographic market is local, or regional
and that customers travel
(or have their products transported) up to
50km to acquire their agricultural input products or building
supplies (and have it
transported up to 100km). The merging parties
further submitted that the closest Kaap Agri retail store is situated
at the Nelspruit
Agrimark, which is more than 400km away from the
nearest store of PBS in Mooi River.
[2]
Upon embarking on their own competition analysis, the Commission was
satisfied with the merging parties' submissions.
[11]
The
Commission concluded that the proposed transaction is unlikely to
substantially prevent or lessen competition in the abovementioned
markets as even in the worst case provincial market, there is no
geographic overlap between the business activities of the merging
parties. We find no reason to disagree with the Commission.
Public
interest
[12]
The
merging parties submitted, and this was confirmed by the Commission,
that the proposed transaction will not result in job losses.
Despite
this submission, the Tribunal sought further assurances that the
proposed transaction would not negatively affect employment.
This was
because SACTWU
[3]
raised concerns regarding the proposed transaction.
[13]
The
Commission communicated with SACTWU which confirmed that their
concerns had been addressed and that they had no further concerns
regarding the proposed transaction. After considering SACTWU's
concerns, the Commission's view and the undertakings from the merging
parties, we are satisfied that there will not be any job losses.
[14]
The
proposed transaction raises no other public interest concern.
Conclusion
[15]
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
approved the proposed
transaction unconditionally.
Mr
Enver Daniels
Mr
Anton Roskam and Prof. Fiona Tregenna concurring.
19 September 2018
Date
Tribunal
Case Manager
: Kgothatso
Kgobe
For
the Merging Parties
: I Gouws
of Werksmans
For
the Commission
: R Ncheche
[1]
See Merger Record, page 57.
[2]
See Merger Record, page 65.
[3]
The Southern African Clothing and Textile Workers Union