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[2019] ZACT 14
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Hirt and Carter Group Proprietary Limited v First Impression Labels Proprietary Limited (LM223Dec18) [2019] ZACT 14 (19 March 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM223Dec18
In
the matter between
Hirt
and Carter Group Proprietary Limited
Primary Acquiring Firm
And
First
Impression Labels Proprietary Limited
Primary Target Firm
Panel
: N Manoim
(Presiding Member)
:
M Mazwai (Tribunal Member)
:
I Valodia (Tribunal Member)
Heard
on
: 06 March 2019
Order
Issued on : 06 March 2019
Reasons
Issued on : 19 March 2019
REASONS
FOR DECISION
Approval
[1]
On
6 March 2019, the Tribunal unconditionally approved a transaction in
terms of which Hirt and Carter Group Proprietary Limited
("H&C")
acquired sole control of First Impression Labels Proprietary Limited
("First Impression").
[2]
The
reasons for the approval follow.
Parties
to the transaction
Primary
Acquiring Firm
[3]
H&C,
a holding company, is controlled by Blackstartiso, which in turn is
controlled by Blackstar Holdings Group (Pty) Ltd ("Blackstar
Holdings"). Blackstar Holdings is ultimately controlled by Tiso
Blackstar Group SE. Collectively these firms will be referred
to as
the "acquiring group". Pertinent to this transaction is
Universal Print Group (Pty) Ltd t/a Uniprint Labels ("Uniprint"),
a firm within the acquiring group, which conducts activities that
overlap with those of the target group.
[4]
Uniprint
is active in the manufacture and supply of labels for consumer,
retail, automotive and industrial goods.
Primary
Target Firm
[5]
First
Impression is controlled by Vaughan and Sandra Cumming, through the
Cumming Family Trust ("CFT"). In addition to
First
Impression, the CFT controls First Impression Properties.
[1]
Collectively these companies will be referred to as the "target
group". First Impression produces and supplies labels
for
consumer goods, particularly fast-moving consumer goods.
Proposed
transaction and rationale
[6]
In
terms of the transaction, H&C will acquire the entire issued
share capital of First Impression, resulting in H&C possessing
sole control over First Impression.
[7]
Regarding
rationale, H&C submitted that combining the businesses as
proposed will bring scale and consistency. The acquiring
group seeks
to provide an integrated one-stop approach to branding, promotion and
marketing of goods and services.
[8]
The
CFT submitted that it sought to realise the capital value of its
investment in First Impression. Further, it submitted that
the target
group will benefit from access to the acquiring group's financial,
administrative, and management systems.
Relevant
market and impact on competition
[9]
The
merging parties are active in the manufacture and supply of a variety
of labelling products. The Commission considered the activities
of
the parties and found that the transaction raises a horizontal
overlap within the national market for the following products:
[9.1]
self-adhesive labels;
[9.2]
shrink sleeves;
[9.3] firm
wraparound labels; and
[9.4]
polyroll/base wrap labels.
[10]
Accordingly, the Commission assessed the horizontal effects of the
transaction on the abovementioned
national product markets.
[11]
The
Commission found that in each respective market, the merged entity
would enjoy market shares not exceeding 5%, with minimal
accretion.
[2]
In addition, the Commission found that there were several alternative
suppliers identified by customers, who will be able to constrain
the
merged entity.
[3]
Based on this, the Commission concluded that the merger is unlikely
to substantially prevent or lessen competition in any market.
Public
interest
[12]
The
Commission investigated the fact that eight Uniprint employees would
be retrenched. The acquiring group submitted that the retrenchments
were the result of a planned decommissioning of two printing presses
that were inefficient and costly to operate, and that the
replacement
machine would be automated thus not requiring dedicated machine
operators.
[4]
[13]
The South African Typographical Union ("SATU") which
represents employees of the merging
parties was of the view that the
retrenchments were not merger specific, and therefore SATU had no
concerns with the proposed transaction.
[5]
Accordingly the Commission concluded that the retrenchments could not
be defined as merger specific.
[14]
The Commission also investigated the merging parties' submission that
a further employee would
be retrenched in the target group. The
retiring employee's contract is due to expire on 31 December 2019 and
will not be renewed.
The Commission considered the age and salary
package of the employee, concluding that that the non-renewal is
unlikely to result
in a significant effect on employment.
Conclusion
[15] In
light of the above, we concluded that the transaction is unlikely to
substantially prevent or lessen
competition in any relevant market.
In addition, no adverse public interest issues arise from the
transaction. Accordingly, we
unconditionally approved the
transaction.
Mr.
Norman Manoim
Ms.
Mondo Mazwai and Prof. lmraan Valodia concurring.
19 March 2019
Date
Tribunal
Case Manager : Andiswa Nyathi
For
the Merging Parties : Claire Avidon
instructed
by Beatrice Steyn of Barkers
For
the Commission
: Seabelo Molefe and Mugau Aphane
[1]
Transcript, 6 March 2019 (LM223Dec18). Page 1, line 23.
[2]
The exception being the national market for the manufacture and
supply of self-adhesive labels, wherein the merged entity will
possess a market share of 9.37%, with market accretion of 3.74%. The
results of the respective national markets assessed are
as follows:
shrink sleeves, post-merger market share 1.79%, accretion 1.27%.
Firm wraparound labels, post-merger market share
1.52%, accretion
0.56%. Polyroll/base wrap labels, post-merger market share 0.04%,
accretion of 0.01%.
[3]
Aquelle, Nestle and Aspen indicated that the market is highly
fragmented with numerous alternatives available.
[4]
The need to decommission the presses was identified around 17 April
2017, whilst the merger negotiations began on 14 June 2018.
[5]
p758 of the merger record.