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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM164DEC20
In the matter between
Zephyr German BidCo GmbH Primary Acquiring Firm
And
Flender GmbH Primary Target Firm
Panel : Ms M Mazwai (Presiding Member)
: Mr E Daniels (Tribunal Member)
: Mr AW Wessels (Tribunal Member)
Heard on : 03 February 2021
Order Issued on : 03 February 2021
Reasons Issued on
: 01 March 2021
REASONS FOR DECISION
Approval
[1] On 03 February 2021, the Competition Tribunal (“Tribunal”) unconditionally
approved a proposed transaction in terms of which Zephyr German BidCo
GmbH (“Zephyr”) intends to acquire sole control over Flender GmbH
(“Flender”).
[2] The reasons for the approval of the proposed transaction follow.
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Parties to the transaction
Primary acquiring firm
[3] The primary acquiring firm is Zephyr, a newly established private company
which was incorporated in accordance with the laws of Germany, specifically
for the purposes of the proposed transaction. Zephyr does not control any
firm/s. Zephyr is indirectly controlled by Carlyle Europe Partners V, a fund
managed by affiliates of the Carlyle Group Inc. (“Carlyle”).
[4] Carlyle is a publicly traded limited partnership which is not controlled by any
shareholder or entity but has several subsidiaries in various countries, including
South Africa. Carlyle and all the firms controlled by it will collectively be referred
to as ‘Carlyle’.
[5] Zephyr does not conduct any business activities. Zephyr’s controlling entity,
Carlyle is a USA -based global asset management firm, which specialises in
private equity investments across four investment disciplines: corporate private
equity, real assets, global market strategies and investment solutions. Carlyle
invests in multiple industries, including transportation, consumer and retail,
financial services, energy and power, real estate, infrastructure and healthcare,
among others. In South Africa, Carlyle generates revenue through entities such
as Accolade Wines, Amecor and iNova Pharmaceuticals, to name a few.
Primary target firm
[6] The primary target firm is Flender GmbH (“Flender”), a private company
incorporated in accordance with the company laws of Germany. Flender is
ultimately controlled by a German company , Siemens Aktiengesellschaft
(“Siemens AG”). Flender has several subsidiaries in Europe, the United States
of America, South America, Asia and Africa. In South Africa, Flender operates
through Flender (Pty) Ltd (“Flender SA”).
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[7] Flender globally supplies mechanical and electrical drive systems and offers a
wide range of gear units, couplings and generators, and associated services,
with a focus on key industries such as wind power, cement, mining, oil and gas,
power generation, water and wastewater, marine, conveyor and crane
technology. Flender’s business o perations are divided into the following
categories:
7.1 Wind - Flender’s wind business division develops, manufactures, and
supplies components for wind turbines.
7.2 Industrial – Flender’s industrial division develops, manufactures and
supplies mechanical components, as well as provides services related to
those components.
[8] In South Africa, Flender supplies industrial gears and coupling products to the
mining, cement, wastewater treatment and energy sectors. Flender has no
manufacturing facilities in South Africa and its South African operations consist
of warehousing, assembly and service workshops to support the needs of its
local customers.
Proposed transaction and rationale
[9] Carlyle, through Zephyr, intends to acquire 100% of the issued shares in
Flender. Post-merger, Carlyle will indirectly own 100% of the shares and voting
rights in Flender and thereby solely control Flender.
[10] The proposed acquisition , being an international transaction , has also been
notified in China, the United States of America, Morocco, Europe and Turkey.
[11] As the transaction is a financial investment for Carlyle, its rationale for the
transaction is to benefit from the potential growth in the value of its investment.
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[12] Siemens AG submitted that the transaction effects its growth -acceleration and
value-creation strategy through the separation of its mechanical and electrical
drive technology business.
Impact on competition
Horizontal analysis
[13] The Commission, in its investigation, found that the Carlyle does not hold a
controlling interest in any firm that offers services that may be interchangeable
with or act as a substitute for the services offered by Flender. Rather, the
transaction presents the Carlyle Group with an opportunity to diversify its
investment portfolio into the sector of mechanical and electrical technology.
[14] There are therefore no horizontal overlaps in the merging parties’ activities as
the Carlyle Group is not active in the manufacture and supply of mechanical
and electrical products globally, including in South Africa.
Vertical analysis
[15] The Commission found there to be no vertical overlap between the merging
parties’ activities as they do not participate at different levels of the same supply
chain.
[16] The Commission, however, noted the existence of a vertical relationship
between the merging parties in in relation to Flender’s upstream activities
in the manufacture and supply of industrial gears and couplings and the
downstream activities of one of Carlyle’s portfolio companie s, The
supply relationship between the merging parties relates to
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[17] The Commission found that does not have manufacturing facilities in
South Africa and its revenues originate from
which are unaffected, from a product or geographic perspective, by the specific
supply relationship of between and Flender in The
Commission’s conclusion on this point was therefore that the transaction raises
no vertical concerns in South Africa.
[18] Based on the above, the Commission found that this merger is unlikely to
substantially prevent or lessen competition in any market.
Public Interest
[19] The merging parties confirmed that no retrenchments will arise in South Africa
as a result of the transaction. The Commission also contacted employee
representatives of Flender SA and of Carlyle. No concerns were raised by the
National Union of Metalworkers of South Africa (“NUMSA”) and Solidarity, who
represent the employees of Flender SA. No concerns were raised by Carlyle’s
employee representatives.
[20] The Commission was also of the view that the merger is unlikely to result in any
duplication of roles or jobs that may lead to retrenchment as there are no
horizontal overlaps between the activities of the merging parties and the
businesses of the merging parties will operate separately as before.
[21] The Commission therefore found that the proposed transaction is unlikely to
negatively impact employment and raises no other public interest concerns.
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,
no public interest issues arise from the proposed transaction.
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[23] Accordingly, we approved the transaction unconditionally.
01 March 2021
Ms Mondo Mazwai Date
Mr Enver Daniels and Mr Andreas Wessels concurring
Tribunal Case Managers
: C Mathonsi
For the Merging Parties : S Madlala and R Van Rensburg of ENS Africa
For the Commission : Z Hadebe and G Mutizwa