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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM002Apr20
In the matter between
Daimler Truck AG Primary Acquiring Firm
And
Ukuvela Holdings Proprietary Limited Primary Target Firm
Panel : Mr E Daniels (Presiding Member)
: Ms A Ndoni (Tribunal Member)
: Prof. F Tregenna (Tribunal Member)
Heard on : 27 May 2020
Order Issued on : 27 May 2020
Reasons Issued on : 15 June 2020
REASONS FOR DECISION
Approval
[1] On 27 May 2020, the Tribunal unconditionally approved the proposed
transaction in terms of which Daimler Truck AG (“Daimler Truck”) is acquiring
control over Ukuvela Holdings Proprietary Limited (“Ukuvela Holdings”).
[2] The reasons for the approval of the proposed transaction follow.
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Parties to the transaction
[3] The primary acquiring firm is Daimler Truck, a public company incorporated in
terms of German Laws. Daimler truck is controlled by Daimler AG (“Daimler”).
Daimler has direct as well as indirect control over numerous firms such as
Mercedes - Benz South Africa Limited, Sandown Motor Holding Proprietary
Limited, and Daimler Trucks and Busses South Africa Proprietary Limited.
Daimler is not controlled by any firm.
[4] The Daimler Group develops, manufactures and distributes products and
services in the automotive sector, on a global scale. Daimler Truck is in charge
of the group’s global business in relation to the manufacturing and distribution
of trucks and busses.
[5] The target firm, Ukuvela Holdings Proprietary Limited (“Ukuvela Holding”) is a
wholly owned subsidiary of Ardan Livvey Investors B.V. (“Ardan Livvey”). Ardan
Livvey is a limited liability company incorporated in accordance with laws of the
Netherlands. Ukuvela Holdings controls Atlantis Foundries Proprietary Limited
(Atlantis) and Ukuvela Properties Proprietary Limited (“Ukuvela Properties”).
[6] Ukuvela Holdings, through Atlantis, operates a metal foundry which
manufactures and sells iron engine blocks for heavy duty trucks.
[7] Atlantis formed part of the Daimler group until 2015 when it was aquired by
Neue Halberg-Guss GmbH. Subsequent to this acquisition, a long-term supply
agreement was concluded between Daimler and Atlantis, in terms of which
Atlantis would supply Daimler with cast iron engine blocks for trucks.
Proposed transaction
[8] Daimler Truck’s intention is to acquire 100% of the issued share capital of
Ukuvela Holdings from Ardan Livvey. Post-merger, Daimler Truck will wholly
own and control Ukuvela Holdings and its subsidiaries.
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Impact on competition
[9] The Competition Commission (Commission) found no horizontal overlap in the
activities of the merging parties due to the fact that no entity from the Daimler
Group is in a position to compete with Ukuvela in the manufacture and supply
of cast iron engine blocks for trucks.
Vertical Assessment
[10] The Commission identified a vertical overlap as Ukuvela, through Atlantis,
supplies cast iron engine blocks for trucks to the Daimler group. In its
assessment, the Commission therefore assessed the upstream market for the
manufacture and supply of cast iron engine blocks, as well as the downstream
market for the manufacture of trucks.
Input foreclosure
[11] With regard to input foreclosure, the Commission questioned Atlantis’ ability
and incentive to deny customers’ access to Atlantis by exclusively dealing with
the Daimler Group, and whether this would substantially lessen competition.
The Commission found that the merged entity will be constrained by other
suppliers in the upstream market. Furthermore, the Parties submit that Atlantis
has been selling a majority of its output to Daimler Trucks, since 2015. The
remaining truck manufacturers that were supplied by Atlantis were in the run-
out phase of their respective product lines and, therefore, the volume of
products supplied by Atlantis to them continued to decrease. The Commission
therefore found that a foreclosure strategy by the merged entity is unlikely to
raise significant concerns. The Commission further found that customers, inter
alia, CA Components raised no concerns/objections regarding the proposed
transaction.
[12] Based on the information above, the Commission is of the view that the
proposed transaction is unlikely to raise input foreclosure concerns.
Customer foreclosure
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[13] The Commission found that Atlantis is the only supplier of cast iron engine
blocks to the Daimler Group. As a result, no third-party suppliers will be affected
by this transaction. In light of the above, the Commission found that the
proposed transaction is unlikely to substantially lessen or prevent competition
in the relevant markets. We find no reason to disagree with the Commission.
Public interest
[14] Subsequent to the Commission’s analysis of the proposed transaction’s
potential effect on employment, small businesses or firms owned by historically
disadvantaged individuals, local production and other public interest
considerations, the Commission found there to be no public interest concerns.
Conclusion
[15] 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.
15 June 2020
Mr Enver Daniels Date
Ms Andiswa Ndoni and Prof. Fiona Tregenna concurring.
Tribunal Case Manager : Camilla Mathonsi and Kgothatso Kgobe
For the Merging Parties : A I. Tzarevski
For the Commission : R Molotsi and T Masithulela