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[2019] ZACT 47
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Bachique 746 (Pty) Ltd v Afrikelp (Pty) Ltd and Others (LM274Mar19) [2019] ZACT 47 (28 August 2019)
Competition
tribunal
SOUTH
AFRICA
COMPETITION TRIBUNAL OF
SOUTH AFRICA
Case
No: LM274Mar19
In
the matter between
Bachique
746 (Pty)
Ltd Primary
Acquiring
Firm
And
Afrikelp
(Pty) Ltd, Afrikelp Holdings (Pty) Ltd,
Afrikelp Primary
Target Firms
Investments
(Pty) Ltd, Akusa, Inc., Taurus Chemicals
Namibia
(Pty) Ltd, Taurus Chemicals Cape Kelp (Pty)
Ltd,
Rotaq LOderitz (Pty) Ltd, Efekto Care (Pty) Ltd,
Efekto
Zambia Ltd, Agro-Serve (Pty) Ltd, Agro-Serve
(Pty)
Ltd (Namibia), Marltons Pets and Products (Pty) Ltd
Panel:
Yasmin Carrim (Presiding Member)
:
Andreas Wessels (Tribunal Member)
:
Fiona Tregenna (Tribunal Member)
Heard
on: :17July2019
Order
Issued on: 17 July 2019
Reasons
Issued on: 28 August 2019
REASONS FOR DECISION
Approval
[1]
On 17 July 2019, the Competition Tribunal (''Tribunal")
unconditionally approved the proposed transaction involving Bachique
746 (Pty) Ltd ("Bidco'') and the target firms: Afrikelp (Pty)
Ltd, Afrikelp Holdings (Pty) Ltd, Afrikelp Investments (Pty)
Ltd,
Akusa, Inc., Taurus Chemicals Namibia (Pty) Ltd, Taurus Chemicals
Cape Kelp (Pty) Ltd, Rotaq LOderitz (Pty) Ltd, Efekto Care
(Pty) Ltd,
Efekto Zambia Ltd, Agro-Serve (Pty) Ltd, Agro-Serve (Pty) Ltd
(Namibia), Marltons Pets and Products (Pty) Ltd, hereinafter
collectively referred to as the Target Businesses'.
[2]
The reasons for approval of the proposed transaction follow.
Parties to the
transaction
Primary
Acquiring Firm
[3]
The primary acquiring firm is Bidco, an
entity established for purposes of this transaction. Bidco is a
consortium consisting of
RMB Ventures Seven (Pty) Ltd ("RMBV"),
BoE Private Equity Investments (Pty) Ltd ("BoE") and the
Management
of the Target Businesses ("Management"). RMBV
and BoE jointly control the consortium.
[4]
RMBV and BoE are the private equity businesses of the
FirstRand Group and the Nedbank Group respectively. Both groups are
involved
in the provision of a broad range of banking and financial
services, which includes amongst others retail banking, investment
banking
and corporate banking.
Primary
Target Firms
[5]
The Target Businesses are controlled by
Ascendis Health Ltd ("Ascendis"). The Target Businesses can
be
divided into three
businesses namely the Afrikelp, Efekto and Marltons Businesses, which
form part of the broader Ascendis Biosciences
Division. Each business
is involved in different activities.
[6]
Afrikelp is involved in
the processing of seaweed extracts (known as kelp) for the production
and supply of plant nutrition products
used in the agriculture and
horticulture sectors. Afrikelp products are used as bio-stimulants to
improve root growth as well as
fruit set.
[1]
[7]
Efekto supplies home and garden pest control products, as well
as garden fertiliser and plant food products (which are sold under
the Wonder Brand). Efekto products are sold through national
retailers, hardware chains, garden centres, farmers' co
operatives
and independent stores.
[8]
Marltons supplies a diverse range of pet products and
accessories except for pet food for dogs and cats. Most of Marltons
products
are imported and sold under the Marltons label. Marltons
products are distributed through national retailers, pet and vet
stores,
nurseries and co-operatives.
Proposed transaction and
rationale
[9]
In terms of the Sale
Agreement,
Bidco will acquire most
of the issued share capital in the Target Businesses and will
therefore control the Target Businesses post
merger.
Impact on competition
[10]
The Competition Commission ("Commission") found no
horizontal or vertical overlap between the activities of the merging
parties. However, the Commission had concerns around RMBV and BoE's
joint shareholding in Bidco and identified possible theories
of harm
likely to result from the proposed transaction. Thus, it decided to
assess the following: (i) whether the consortium would
dampen
competition between RMBV and BoE in the market for private equity and
(ii) whether the proposed transaction will result
in information
exchange of competitively sensitive information between RMBV and BoE.
[11]
The Commission was concerned that the consortium would serve
as platform for collusion not only for the consortium members but
also
their ultimate controllers. The Commission was of the view that
RMBV and BoE would enter into an agreement not to compete with each
other in current and future investments. To give effect to the
agreement, they would share competitively sensitive information,
so
they don't offer competing bids.
[12]
Despite the concerns, the Commission's investigation revealed that it
is unlikely that the proposed transaction will result
in coordination
and information exchange. First, RMBV and BoE are small players in
the private equity market. Should they attempt
to collude, their
conduct will be constrained by a number of competitors. Secondly,
RMBV and BoE invest in various industries that
are generally not in
competition with one another. Therefore, it is unlikely that they
would collude in respect of future investments.
[13]
Thirdly, RMBV and BoE not only compete with private equity firms
(both local and international) but also other players such
as
traders, Black Economic Empowerment investors and industrialists.
Hence, the coordination would not be externally sustainable.
[14]
In light of the above, the Commission concluded that the proposed
transaction was unlikely to substantially prevent or lessen
competition in any relevant market. We saw no reason to differ from
this conclusion.
Public interest
[15]
The merging parties confirmed that the proposed transaction would not
have any negative effects on employment in South Africa.
[16]
The pro
posed transaction raised no other
public interest concerns.
Conclusion
[17]
I
n light of the above, we approved the
proposed transaction unconditionally.
Ms Yasmin Carrim
Mr
Andreas Wessels and Prof. Fiona Tregenna concurring.
28
August 2019
Date
Tribunal
Researcher:
Hlumelo Vazi
For
the merging parties:
M Garden
and A Scallan of ENSafrica
For
the Commission
R Darji and T Masithulela
[1]
As a bio-stimulant applied to agricultural crops, kelp gives these
plants increased access to additional nutrients by increasing
root
growth of the plants. Thus, kelp decreases stress in crops caused by
growth hormones or growth regulators are readily available
in the
kelp leaves because sea plants do not have root systems and thus
these hormones are readily available in the plant itself.