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[2019] ZACT 3
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Unemployment Insurance Fund, duly represented by the Public Investment Corporation SOC Limited v LA Crushers (Pty) Ltd (LM209Nov18) [2019] ZACT 3 (16 January 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM209Nov18
In
the matter between:
Unemployment
Insurance Fund, duly
Primary
Acquiring Firm
represented by the Public
Investment
Corporation SOC Limited
And
LA
Crushers (Pty) Ltd
Primary Target
Firm
Panel
: Norman Manoim (Presiding Member)
:
Enver Daniels (Tribunal Member)
:
Andiswa Ndoni (Tribunal Member)
Heard on
:
16 January 2019
Order Issued on
:
16 January 2019 Reasons
Issued on
:
07 February 2019
REASONS
FOR DECISION
Approval
[1]
On
16 February 2019, we unconditionally approved the large merger
transaction whereby the Unemployment Insurance Fund (UIF), duly
represented by the Public Investment Corporation SOC Limited (PIC)
intends to acquire control of LA Crushers (Pty) Ltd (LA Crushers).
The UIF, the PIC and LA Crushers are collectively referred to as 'the
merging parties'.
[2]
Our
reasons for the approval follow.
Parties to the transaction
Primary
Acquiring Firm
[3]
The
UIF invests in a number of assets such as equities, property and
fixed income. These assets are managed by the PIC.
[4]
The
UIF is not controlled by any firm.
Primary
Target Firm
[5]
LA
Crushers conducts load and haul material handling services which
include but are not limited to mining haul services, material
handling services and magnetite handling. LA Crushers conducts its
operations in Phalaborwa, Limpopo.
[6]
The
Government Employment Pension Fund (GEPF) and the Compensation Fund
(CF) which are also duly represented by the PIC, are shareholders
in
LA Crushers.
Proposed
transaction
[7]
This is a financial transaction whereby
the PIC, on behalf of the UIF, intends to make a capital injection
[….] into LA Crushers
as well as shareholder loans [….]
in return for a 49.5% shareholding in LA Crushers.
[8]
The pre-merger shareholding interest in
LA Crushers is held as follows: CF (43%), GEPF (43%) and the
remainder held by LA Smith
Family Holdings.
[9]
The
merger transaction will ultimately result in a dilution of the
shareholding in LA Crushers. Post-merger, the UIF will hold 49,5%
the
GEPF will hold 38.2%, CF will hold 2.9%, and the remainder held by LA
Smith Family Holdings. Be that as it may, the board composition
of LA
Crushers will remain unchanged.
[10]
Accordingly, the UIF, GEPF and CF ('the public entity shareholders')
will jointly control LA Crushers.
[11]
The
merger transaction has been executed in effort to assist and restore
the financial health of LA Crushers as it undergoes financial
difficulties [….] which would negatively affect its entire
workforce.
Competition
analysis
[12]
The
Competition Commission (Commission) considered the activities of the
merging parties and found that there is no horizontal overlap
nor is
there a vertical relationship between the activities of the parties.
The PIC does not have any controlling interests in
firms that provide
load and haul material handling services. The Commission however
noted that the PIC, on behalf of CF, holds
a small non-controlling
interest in Fountain Civil Engineering (Pty) Ltd ("Fountain"),
a firm that provides the same
services as LA Crushers. When the
Commission contacted the customers of LA Crushers, they were of the
view that Fountain and LA
Crushers were not competitors as they are
based in different regions of the country.
[13]
The
Commission therefore concluded that the merger transaction is
unlikely to result in a substantial lessening of prevention of
competition in any market. We agree. It emerged at the hearing that
the PIC would continue to represent the public entity shareholders,
in the same manner it had pre-merger. Since these shareholders, as
represented by the PIC, held a controlling interest in the company
pre-merger and would continue to do so post-merger, there will be no
change in the incentives of the company in the market from
what it
was pre-merger.
[14]
For
this reason we had no reason to differ with the Commission's
findings.
Public
interest
[15]
The merging parties were of the view
that absent the merger transaction, LA Crushers [.…] would
experience substantial job
losses. As such, the merger transaction
aims to achieve the counterfactual scenario.
[16]
The
employees of the UIF are not represented by any trade union. The
employee representatives of LA Crushers are the National Union
of
Mineworkers (NUM) and the Association of Mineworkers and Construction
Union (AMCU). Both NUM and AMCU were served with the merger
filing.
However, they did not indicate to the Commission whether or not the
merger transaction raised any concerns.
[17]
Given
that the merger transaction does not raise any competition concerns
or job losses, the Commission concluded that it was unlikely
for the
merger transaction to result in any employment or other public
interest concerns.
[18]
We
agreed with the Commission's findings.
Conclusion
[19]
In view of the above, the merger
transaction will not result in a substantial lessening or prevention
of competition in any market.
Furthermore, the merger transaction
does not give rise to any employment concerns or adversely impact
other public interest grounds.
[20]
Accordingly, we unconditionally approved
the merger.
Mr
Norman Manoim
Mr
Enver Daniels and Ms Andiswa Ndoni concurring
07
February 2019
Date
Tribunal
Case Manager
: Ndumiso
Ndlovu.
For
the Merging Parties
: K Tlhabanelo
of Cliffe Dekker Hofmeyr.
For the
Commission
: T Loate and W Gumbie.