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[2019] ZACT 81
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Carlyle SMD Investment Mauritius Holding Company v SMD Technologies (Pty) Ltd (LM096Sep19) [2019] ZACT 81 (9 December 2019)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM096Sep19
In
the matter between
Carlyle
SMD Investment Mauritius Holding Company
Primary
Acquiring Firm
And
SMD
Technologies {Pty)
Ltd
Primary
Target Firm
Panel
: Enver Daniels (Presiding Member)
: Yasmin Carrim (Tribunal Member)
: Anton Roskam (Tribunal Member)
Heard
on
: 06 November 2019
Order
Issued on : 06 November 2019
Reasons
Issued on : 09 December 2019
REASONS FOR DECISION
Approval
[1]
On
06 November 2019, the Competition Tribunal ("Tribunal")
unconditionally approved the proposed transaction involving
Carlyle
SMD Investment Mauritius Holding Company ("Carlyle SMD")
and SMD Technologies (Pty) Ltd ("SMD"), hereinafter
collectively referred to as the merging parties.
[2]
The reasons for the approval of the
proposed transaction follow.
Parties to the transaction
Primary Acquiring Firm
[3]
The
primary acquiring firm is Carlyle SMD, a firm incorporated in
accordance with the laws of Mauritius and established for purposes
of
the proposed transaction. Carlyle SMD is controlled by First Carlyle
Growth V ("First Carlyle") and ultimately controlled
by The
Carlyle Group L.P. The Carlyle Group L.P controls many firms
including Amrod Corporate ("Amrod"). Amrod, Carlyle
SMD and
all firms directly and indirectly controlling them are hereinafter
collectively referred to as the 'Acquiring Group'.
[4]
The Acquiring Group is a global private
equity, alternative asset management and financial services
corporation. It specialises
in corporate private equity, real assets,
global credit and investments. Of relevance to the proposed
transaction are the activities
of Amrod.
[5]
Amrod is involved in the wholesale
supply of corporate branded promotional products such as electronics,
gifts, headwear and clothing.
Amrod does not manufacture any of the
products, it simply procures the products from local and
international suppliers, brands
them in-house and sells them to
marketing companies or individual companies for marketing purposes.
Primary Target Firm
[6]
SMD is not controlled by a single firm.
Its shareholders are Mr Avi Mishan, Mr Clive Sacks and Mr Simca
Diskin (hereinafter referred
to as the 'Founders'). SMD controls four
firms which are situated in South Africa, the United Kingdom and the
United States of
America.
[7]
SMD manufactures and distributes high
quality personal and commercial electronics, audio products, bags and
luggage products. The
electronics are supplied to major electronic
retailers. SMD also manufactures and brands products on behalf of
third parties.
Proposed transaction
[8]
In terms of the
Subscription
and Sale of Shares Agreement,
Carlyle
SMD will acquire 50% of share capital holding in SMD. Post-merger,
Carlyle SMD will exercise joint control over SMD.
Impact on competition
[9]
The Competition Commission
("Commission") found no horizontal overlap between the
activities of the merging parties as
Amrod does not manufacture
personal and commercial electronics and audio products, nor does it
sell its products to retailers.
[10]
The Commission did however identify a
vertical relationship between Amrod and SMD as SMD purchased some
corporate branded promotional
products from Amrod during the year
2018. As such, the Commission decided to assess the effects of the
proposed transaction in
the markets where the merging parties operate
namely (i) the national market for manufacturing and supply of
personal and commercial
electronic and audio products and (ii) the
national market for the wholesale supply of corporate branded
promotional products.
[11]
In the market for the manufacturing and
supply of personal and commercial electronic and audio products, the
Commission found that
SMD's market share does not exceed 10%. The
Commission is of the view that the proposed transaction does not
raise foreclosure
concerns as SMD has never sold any of its products
to Amrod or Amrod's competitors. Moreover, SMD will continue to face
competition
from other suppliers such as Connoisseur, Tevo, Home-mark
and Lux Brands.
[12]
In the market for the wholesale supply
of corporate branded promotional products, the Commission found that
Amrod has a market share
of less than 15%. The Commission is of the
view that the proposed transaction will not result in input or
customer foreclosure
as customers of corporate branded products have
alternative suppliers to turn to should Amrod choose to engage in a
foreclosure
strategy. In the event that SMD decides to purchase all
its corporate branded promotional products from Amrod, it still won't
be
cause for concern as SMD is an insignificant customer of such
products and Amrod's competitors won't be affected by the decision.
[13]
Given the above, the Commission
concluded that the proposed transaction is unlikely to substantially
prevent or lessen competition
in any relevant market. We find no
reason to differ with the Commission's findings.
Public interest
[14]
The merging parties confirmed that the
proposed transaction would not have any negative effects on
employment in South Africa.
[15]
The proposed transaction raises no other
public interest concerns.
Conclusion
[16]
In light of the above, we conclude that
the proposed transaction is unlikely to prevent or lessen competition
in any relevant market.
In addition, no other public interest
concerns _arise from the proposed transaction. Accordingly, we
approve the proposed transaction
unconditionally.
Mr
Enver Daniels
Ms
Yasmin Carrim and Mr Anton Roskam concurring.
09 December 2019
Date
Tribunal
Researcher
: Hlumelo Vazi
For
the merging parties : S van der
Meulen of Webber Wentzel
For
the Commission
:N Ncheche and T Mahlangu