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[2019] ZACT 68
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Footgear (Pty) Ltd v Assets and business associated with the "Edgars Active" and "High Key" brands of Edcon Ltd (LM075Jul19) [2019] ZACT 68 (17 October 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM075Jul19
In
the matter between:
Footgear
(Pty)
Ltd
Primary Acquiring Firm
and
The assets and business
associated with the
"Edgars Active"
and "High Key"
brands of Edcon
Ltd
Primary Target Firm
Panel:
Enver Daniels (Presiding Member)
:
Yasmin Carrim Tribunal Member)
:
Andiswa Ndoni (Tribunal Member)
Heard
on : 18 September 2019
Order
Issued on : 18 September 2019
Reasons
Issued on : 17 October 2019
Reasons for Decision
Approval
[1]
On 18 September 2019, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction between Footgear
(Pty) Ltd and the assets and business associated with the "Edgars
Active" and "High Key" brands of Edcon Ltd.
[2]
The reasons for the unconditional approval follow.
Parties to proposed
transaction
Primary
acquiring firm
[3]
The primary acquiring firm is Footgear (Pty) Ltd ("Footgear"),
a company incorporated in accordance with the company laws
of South
Africa. Footgear is wholly owned and controlled by Footgear Holdings
(Pty) Ltd, which is, in turn, controlled by OMPE
GP IV (Pty) Ltd
("OMPE"). OMPE is ultimately controlled by Old Mutual Ltd
("OM"). OM is listed on the Johannesburg
Stock Exchange and
is therefore not controlled by any firm.
[4]
Footgear does not control any firm/s.
[5]
Footgear Holdings is a newly incorporated company. Its sole
purpose is to hold 100% of the shares in Footgear.
[6]
In South Africa, OM ultimately controls in excess of 100
firms. Relevant for purposes of the proposed transaction, that is, in
addition
to its controlling interest in Footgear, is its ultimate
controlling interest in MoreCorp (Pty) Ltd ("MoreCorp").
The
relevance of which is made clear below.
[7]
Footgear, Footgear Holdings and their ultimate controllers
are, hereafter, collectively referred to as the Acquiring Group.
[8]
The Acquiring Group has interests in a number of companies
active in several industries, including,
inter a/ia,
financial
services, life and savings, property and asset management. Apposite
to the present transaction are the activities of Footgear
and
MoreCorp.
[9]
Footgear
primarily operates as a retailer of footwear and, on a limited scale,
as a retailer of accessories and apparel.
[1]
Footgear stocks brands, such as Levi's, CAT, Hi-Tee, New Balance,
Reebok, Asics, Nike, Adidas and Puma. Footgear's footwear offering
caters across categories, gender and age groups, servicing men, women
and children. This offering includes an array of casual and
leisure
footwear, which includes fashion footwear, outdoor footwear,
sports performance and sports inspired footwear.
[10]
MoreCorp,
on the other hand, is primarily involved in the retail of golf and
cycling equipment as well as related products and accessories.
[2]
MoreCorp also provides golf and cycling training facilities and
online platforms which allow for the booking of golf games, sports
related travel or holidays and online advertising.
Primary
target firm
[11]
The primary target firm is the assets and business associated
with the "Edgars Active" and "High Key" brands
of
Edcon Ltd ("the Target Business").
[12]
The target business is within the Jet Division of Edcon Ltd.
Edcon Ltd is a listed company and is therefore not controlled by any
firm.
[13]
The
Target Business is active in the retailing of men's, women's and
children's active footwear, apparel and accessories. Brands
sold by
the Target Business include, amongst others, Edcon's in-house Pro
Action and Jabari brands, as well as Adidas, New Balance,
Nike, Puma
and Reebok.
[3]
Proposed
transaction and rationale
[14]
Footgear intends to acquire the Target Business as a going
concern from Edcon Ltd. Post-merger, the Target Business will be
owned
and controlled by Footgear.
[15]
The
proposed transaction will afford Footgear an opportunity to fast
track the growth and geographic coverage of its retail footprint,
in
that the vast majority of the Target Business' outlets are situated
in locations where Footgear does not have significant presence.
[16]
From the perspective of Edcon Ltd., the sale of the Target
Business to Footgear will provide it with the best prospect of
continued
existence in light of the financial difficulty that it has
been experiencing of late.
Impact on competition
[17]
The
Commission considered the activities of the merging parties
and found that there is a horizontal overlap in the
retailing
of athleisure footwear, apparel and accessories. As such, the
Competition Commission ("the Commission") assessed
the competition effects in the following markets:
Branded
products
17.1
The
national market for the retail of athleisure branded footwear;
17.1.1
Within
this market, the Commission found that the merged entity will account
for 11% of the market, with a market share accretion
of 5%.
[4]
It further found that the merged entity will continue to face
competition from various other players, including Total Sport, Sport
Scene, Studio 88, Cross Trainer and Tekkie Town.
17.2
The national market for the retail of athleisure
branded apparel;
17.2.1
The
Commission found that Footgear is barely active in this segment of
the market, with an estimated market share of 0.008%, whereas
the
Target Business has an estimated market share of 8.5%.
17.3
The
national market for the retail of athleisure branded accessories;
17.3.1
The Commission found that Footgear is barely active in this
segment of the market as it has an estimated market
share
of 1.1%, while the Target Business has an estimated
market of 10.3%.
17.4
The
national market for the retail of athleisure branded footwear,
apparel and accessories;
17.4.1
Within
this market, the Commission found that the merged entity will account
for approximately 10.6% of the market, with an accretion
of 6%. It
further found that there are alternative players in the market that
will continue to constrain the merged entity,
such as Cross
Trainer, Tekkie Town, Street Fever, Nike, Adidas and Total Sport.
Non-branded
products
17.5
The
national market for the retail of athleisure non-branded
footwear;
17.5.1
Within this market, the Commission found that the merged
entity will account for 31% of the market, with an accretion of 10%.
The
merging parties will continue to face competition from a number
of competitors, such as Mr. Price, Mr. Price Sports, Edgars,
Ackerman's,
Jet and Woolworths.
17.6
The
national market for the retail of
a
thleisure non-branded
apparel;
17.6.1
The Commission found that while the Target Business has an
estimated market share of 6.5%, Footgear is not active in this
market.
17.7
The
national market for the retail of athleisure non-branded
accessories;
17.7.1
The Commission found that the merged entity will have an
estimated market share of 5.9%, with an accretion of 5.7%. Footgear
was
found to be barely active in this market.
17.8
The
national market for the retail of athleisure non-branded footwear,
apparel and accessories.
17.8.1
The Commission found that the merged entity will have an
estimated market share of 9.3%, with an accretion of 7%.
[18]
In addition to the aforementioned, the Commission noted that
while both the merging parties offer credit facilities, this was
unlikely
to give them a significant competitive advantage as it was
found that the provision of credit is not a significant consideration
by customers. Furthermore, the competitors of the merging parties,
such as Tekkie Town, were found to offer similar credit facilities.
[19]
Given
the relatively low market shares and the presence of alternative
players in each of the aforementioned markets, the Commission
concluded that the proposed transaction is unlikely to substantially
prevent or lessen competition.
Public interest
[20]
The merging parties gave an undertaking not to effect
retrenchments as a result of the proposed transaction.
[21]
In view of the merging parties' undertaking, the Commission
concluded that the proposed transaction is unlikely to give rise to
merger specific retrenchments.
Conclusion
[22]
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, the proposed
transaction raises no public interest concerns. Accordingly, we
approved the proposed
transaction unconditionally.
Presiding
Member:
Mr.
Enver Daniels
17
October 2019
DATE
Ms Yasmin Carrim and Ms
Andiswa Ndoni concurring
Case
Manager: Helena Graham
For
the merging parties: Mark Garden of ENSafrica
For
the Commission:
Billy
Mabatamela and Themba Mahlangu
[1]
Footgear operates via 63 "brick and mortar"
stores and also sells online
[2]
Golfing equipment includes golf clubs, golf balls, bags and carts.
Cycling equipment includes branded bicycles, components
and accessories.
[3]
The Target Business comprises approximately 116 retail stores across
the continent (with 109 of these stores located in South
Africa).
These stores are typically located in shopping streets in central
business districts, as well as shopping
centres.
[4]
The Commission used data, obtained from market participants to
estimate the market shares of the merging parties and their
competitors in the relevant markets, of 2018