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[2020] ZACT 82
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Ferro South Africa (Pty) Ltd v Performance Colour Systems, a Division of Speed Bird Investment Holdings (Pty) Ltd (LM120Oct19) [2020] ZACT 82 (29 January 2020)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM120Oct19
In
the matter between
Ferro
South Africa (Pty) Ltd
Primary Acquiring Firm
And
Performance
Colour Systems, a Division of Speed Bird
Investment
Holdings (Pty) Ltd
Primary Target Firm
Panel
: Ms Y Carrim (Presiding Member), Ms A Ndoni (Tribunal Member), Prof.
H Cheadle (Tribunal Member)
Heard
on: 15 January 2020
Order
Issued on : 15 January 2020
Reasons
Issued on : 29 January 2020
REASONS
FOR DECISION
Approval
[1]
On 15 January 2020, the Tribunal unconditionally approved the
proposed transaction in terms of which Ferro South Africa
(Pty) Ltd
(Ferro) is acquiring control over Performance Colour Systems, a
Division of Speed Bird Investment Holdings (Pty) Ltd
(PCS).
[2]
The reasons for the approval of the proposed transaction follow.
Parties
to the transaction
[3]
The primary acquiring firm is Ferro, a South African private company
which is wholly controlled by Bud Chemicals and Minerals
(Pty) Ltd.
Ferro is a manufacturer and distributor of, inter alia, porcelain
enamel, prepared glazes and masterbatches.
[1]
Of relevance for competition assessment in this proposed transaction
is Ferro's activities in relation to the manufacture and distribution
of black, white, filler and desiccant masterbatches.
[4]
The target firm is PCS, a South African private company and trading
division of Speed Bird. PCS manufactures, imports
and supplies colour
masterbatches, pigment powder and liquid concentrates. However, PCS
does not manufacture black masterbatch,
but manufactures the entire
range of colour, white, filler, additive and desiccant masterbatches.
Proposed
transaction and rationale
[5]
Ferro intends to acquire the assets and liabilities of PCS as a going
concern. Post-merger, Ferro will exercise sole control
over PCS.
Impact
on competition
[6]
The Competition Commission (Commission) assessed the activities of
the merging parties and found a product overlap between
the
activities of the merging parties because they are both active in the
manufacture and supply of masterbatches in SA. However,
the
Commission found that the product overlap between the merging parties
is limited due to a difference in the product mix of
their offerings,
as well as their distinct customer base.
[2]
The Commission assessed the market and found that the merged entity
will have a market share within the range of 24%-26%, with
an
accretion of 3%-7%. The Commission further found that the merged
entity will be competitively constrained by imports from China
and
other market participants such as Clariant, SAPY and Chemiplast.
[7]
The Commission further found the proposed transaction presents a
vertical overlap in the market for the supply of calcium
carbonate
and black masterbatch. This is because ldwala, an entity related to
Ferro, supplies PCS with black masterbatches and
calcium carbonate
which is used in the manufacture of filler masterbatches. The
Commission did not conduct a vertical assessment
because no concerns
were raised by market participants. Based on the above, the
Commission found that the proposed transaction
is unlikely to result
in any foreclosures.
[8]
One of the merging parties' competitors submitted that the merged
entity might have portfolio products that will enable
it to offer a
bundle of products that no other competitor could duplicate. Due to
information received from third parties, the
Commission is of the
view that this concern is unsubstantiated. This is because (i} The
merged entity will be constrained by other
market participants; (ii}
The merging parties' customers are of the view that a "bundle"
that the merged entity could
create can be duplicated by other market
participants such as Masterbatch SA; and (iii} The merging parties
submitted that tying
and bundling is already taking place in the
market, and that the merger will not bring about any change in that
regard.
[3]
Public
interest
[9]
The proposed transaction does not raise any public interest concerns.
All employees of PCS will be transferred in terms
of
section 197
of
the
Labour Relations Act 66 of 1995
.
Conclusion
[10]
In view of the above, we concluded that the proposed transaction is
unlikely to substantially prevent or lessen competition
in any
relevant market. In addition, no public interest issues arise from
the proposed transaction. Accordingly, we approved the
proposed
transaction unconditionally.
Ms
Yasmin Carrim
Ms
Andiswa Ndoni and Prof. Halton Cheadle concurring.
DATE:
29 January 2020
Tribunal
Case Manager : Kgothatso Kgobe
For
the Merging Parties : P Coetser and M Livingstone of Werksmans
For
the Commission: N Msiza and M Aphane
[1]
Masterbatches are used as a colourant in the manufacturing of
plastics.
[2]
Refer to paragraphs 3 and 4 for a distinction in the merging
parties' product offering.
[3]
Hearing Transcript, page 4 lines 17-25.