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[2021] ZACT 22
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Devland Cash and Carry (Pty) Ltd v Certain stores of Masscash (Pty) Ltd (LM163Dev20) [2021] ZACT 22 (24 March 2021)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: LM163Dev20
In the matter between:
Devland
Cash and Carry (Pty)
Ltd
Primary
Acquiring Firm
And
Certain
stores of Masscash (Pty)
Ltd
Primary
Target Firm
Panel :
Ms Y Carrim (Presiding Member)
:
Mr E Daniels (Tribunal Member)
:
Prof. F Tregenna (Tribunal Member)
Heard
on
:
15 February 2021
Order
Issued on :
16 February 2021
Reasons
Issued on :
10 March 2021
Revised
Reasons Issued on :
24 March 2021
REASONS FOR DECISION
Conditional
approval
[1]
On 16 February 2021, the Competition Tribunal ("Tribunal")
conditionally approved
the proposed transaction whereby Devland Cash
and Carry (Pty) Ltd ("Devland") intends to acquire certain
stores owned by
Masscash (Pty) Ltd ("Target Stores"). Upon
implementation of the proposed transaction, the Target Stores will be
wholly
owned and controlled by Devland.
[2]
The reasons for the conditional approval follow.
Parties
to the proposed transaction
Primary
Acquiring Firm
[3]
The primary acquiring firm is Devland, a private company incorporated
in accordance with the
laws of the Republic of South Africa. Devland
is jointly controlled by two individuals, Mr Mahomed Gathoo and Mr
Shiraz Gathoo.
[4]
The stores of the acquiring firm operate a hybrid model wherein they
trade in both the wholesale
and retail of groceries and related
products.
Primary
Target Firms
[5]
The target firm comprises of the Target Stores which are owned by
Masscash (Pty) Ltd ("Masscash").
Masscash is controlled by
Massmart Holdings Limited ("Massmart"). Massmart owns
retail and wholesale stores.
[6]
The Target Stores subject to the proposed transaction include:
[6.1]
Cambridge Food located in Kempton
Park;
[6.2]
Cambridge Food located in Bloemfontein;
[6.3] Cambridge
Food located in Johannesburg CBD;
[6.4]
QwaQwa Cash and Carry located in QwaQwa;
[6.5]
Rhino Cash and Carry located in Lusikisiki;
[6.6]
Rhino Cash and Carry located in Umlazi;
[6.7]
Rhino Cash and Carry located in Umzinto;
[6.8]
Rhino Cash and Carry located in Flagstaff;
and
[6.9]
Klerksdrop Cash and Carry located
in Klerksdrop.
[7]
The above Target Stores are mainly grocery retail stores located in
various parts of South
Africa.
Proposed
transaction
[8]
The proposed transaction is made up of two indivisible parts that
constitute a single transaction.
The first leg of the merger entails
the acquisition by Devland of certain stores within Masscash from
Massmart. Post-merger, the
Target Stores will be wholly owned and
controlled by Devland.
[9]
The second leg of the merger involves the acquisition of the Target
Stores, in which Devland
will acquire 2 (two) immovable properties in
Klerksdorp and QwaQwa. The businesses of Klerksdorp Cash and Carry
and QwaQwa Cash and
Carry are conducted on these properties
respectively.
Rationale
[10]
The acquiring firm is looking to expand its national footprint in the
grocery retail market. With respect to the
primary target firm,
following a review of its stores, Massmart decided to close
non-performing stores. The sale of these stores
will ensure that the
affected employees do not lose their employment. Accordingly, the
acquiring firm will employ all affected employees
on terms and
conditions of employment that are no less favourable to the employees
than those which they enjoyed with Massmart.
Competition
analysis
[11]
The Commission found that the proposed transaction results in a
horizontal overlap between the activities of the merging parties
in
respect of the retail and wholesale trade of groceries and found as
follows:
[10.1] In the market for the retail of grocery products
in Johannesburg (Newtown), the Commission found that the merged
entity will
have a market share of less than 10% with an accretion
below 5%. Furthermore, the merged entity will continue to be
constrained by
several firms such as Central Fruits and Veg, Kwikspar
Jeppe, Spar Newtown, Al Bengle Supermarket, Fordsburg Café and
Supermarket,
Shoprite End Street and Newtown Supermarket, amongst
others.
[10.2] With regards to Klerksdorp, the Commission found
that the merged entity will have a market share of less than 20% and
will
continue to face competition from other retailers in the market
such as Overland Cash and Carry, Tom's Choice, Mega Packaging, OK
Grocer Minimarket, amongst others.
[10.3] In respect of the wholesale trade in grocery
products in New Castle, QwaQwa, and Phuthaditjhaba, the Commission
found that
the merged entity will have a market share of less than
10% with an accretion of approximately 3%. The merged entity will
continue
to face competition from other wholesalers such as Phoenix
Cash and Carry, PMB Wholesalers, Howick Wholesalers, Champion Cash
and
Carry and Goolams Wholesalers, amongst others.
Public
Interest
[12]
During the merger investigation, the merging parties submitted that
the proposed transaction will not result in any
retrenchments and
provided an unequivocal undertaking to the Commission to this effect.
It was submitted by the merging parties that
the employees of the
Target Stores will be transferred in terms of
section 197
of the
Labour Relations Act 66 of 1995
and accordingly their employment
conditions will not be negatively affected.
[13]
However, during the Tribunal proceedings the merging parties agreed
to a moratorium on employment for a period of
9 months, which was
imposed as a condition to the merger.
[14]
In relation to the proposed transaction's effect on the greater
spread of ownership by Historically Disadvantaged
Persons ("HDPs")
and workers, the merging parties submitted that the acquiring firm is
owned by HDPs while the Target Stores
are not owned by HDPs. The
proposed transaction will therefore lead to an increase in the spread
of ownership HDPs.
Conclusion
[15]
Based on the above, we are of the view that the proposed transaction
is unlikely to substantially prevent or lessen
competition in any of
the relevant markets. Furthermore, the proposed transaction does not
raise any public interest concerns. We
therefore approved the merger
subject to the employment condition set out in the attached Annexure
A.
Signed
by:Yasmin Tayob Carrim
Signed
at:2021-03-24
+0200
Reason:Witnessing
Yasmin Tayob Carrim
24 March 2021
Ms
Yasmin
Carrim
Date
Mr
Enver Daniels and Prof. Fiona Tregenna
Tribunal Case
Manager: Lumkisa
Jordan
For the merging
parties: Kwena
Mahlakoana of Kwena Mahlakoana Attorneys
For the
Commission: Mogau
Aphane and Thabelo Masithulela
ANNEXURE A
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
Case
No.: LM163Dec20
In
the matter between:
Devland Cash and Carry (Pty)
Ltd
Primary
Acquiring Firm
And
Certain
stores of Massach (Pty)
Ltd
Primary
Target Firm
CONDITIONS
1.
DEFINITIONS
The
following expressions shall bear the meanings assigned to them below
and cognate expressions bear corresponding meanings: â
1.1
"Acquiring Firm" means Devland Cash and Carry (Pty) Ltd;
1.2
"Approval date" means the date referred to in the
Competition Tribunal's merger clearance certificate (Form CT10);
1.3
"Day" means any calendar day which is not a Saturday,
Sunday or public holiday in South Africa;
1.4
"Commission" means the Competition Commission of South
Africa;
1.5
"Commission Rules" means the Rules for the Conduct of
Proceedings in the Commission;
1.6
"Competition Act" means the Competition Act, No. 89 of
1998, (as amended);
1.7
"Conditions" mean these conditions.
1.8
"Employees" means employees of the Target Stores to be
transferred to the Acquiring Firm in terms of section 197 of
the LRA
and the employees of the Acquiring Firm and the Target Stores as at
the Approval Date of the proposed transaction;
1.9
"Implementation Date" means the date, occurring after the
Approval Date, on which the Merger is implemented by the Merging
Parties;
1.10
"LRA" means the Labour Relations Act, No. 66 of 1995, (as
amended);
1.11
"Merger" means the acquisition of the Target Stores by the
Acquiring Firm;
1.12
"Merging Parties" means the Acquiring Firms and the Target
Stores;
1.13
"Moratorium" means a period of 9 months from the
Implementation Date;
1.14
"Rules" mean the Rules for the Conduct of Proceedings in
the Competition Commission and the Rules for the Conduct of
Proceedings in the Competition Tribunal;
1.15
"Target Stores" mean the stores that are subject of the
Merger, a list of which appears as Appendix Al of these Conditions.
1.16
"Tribunal" means the Competition Tribunal of South Africa;
and
1.17
"Tribunal Rules" means the Rules for the Conduct of
Proceedings in the Tribunal.
2.
CONDITIONS TO THE APPROVAL OF THE MERGER
2.1
The Merging Parties shall not retrench any Employees for a period of
9 (nine) months from the Implementation Date.
2.2
For the sake of clarity, retrenchments do not include:
(i)
voluntary separation arrangements;
(ii)
voluntary early retirement packages;
(iii)
retrenchments as a result of unreasonable refusals to be redeployed
in
accordance with the provisions of the LRA;
(iv)
resignations or retirements in the ordinary course of business;
(v) retrenchments lawfully
effected for operational requirements unrelated to the Merger;
(vi)
terminations in the ordinary course of business, including but not
limited
to, dismissals as a result of misconduct or poor performance;
and
(vii) any
decision not to renew or extend a contract of a contract worker.
3.
MONITORING OF COMPLIANCE WITH THE CONDITIONS
3.1
The Merging Parties shall circulate a copy of the
Conditions to all
their employees within 5 (five) Days of the Approval Date.
3.2
As proof of compliance with 3.1 above, a director
of each Merging
Party shall within 10 (ten) Days of circulating the Conditions,
submit to the Commission an affidavit attesting to
the circulation of
the Conditions and provide a copy of the notice that was sent to the
employees in that regard.
3.3
The Acquiring Firms shall inform the Commission
in writing of the
Implementation Date within 5 (five) Days of its occurrence.
3.4
The Acquiring Firm shall, on the 9
th
(ninth) month
following Implementation Date, submit an affidavit confirming
compliance with the condition 2.1 above for the duration
of the
Moratorium.
3.5
In the event that the
Commission receives any complaint in relation to noncompliance
with
the above Conditions, or otherwise determines that there has been an
apparent breach by the Merging Parties of these Conditions,
the
breach shall be dealt with in terms of Rule 39 of the Commission
Rules read together with Rule 37 of the Tribunal Rules.
4.
VARIATION
4.1
The Commission or the Merging Parties may at any
time, on good cause
shown, apply to the Tribunal for the Conditions to be lifted, revised
or amended.
5.
GENERAL
5.1
All correspondence in relation these conditions
must be submitted to
the following email address: mergerconditions@compcom.co.za and
ministry@thedtic.gov.za.
APPENDIX A 1
A
list of Target Stores
Store
Location
Cambrid e Food
Kem ton Park
Cambrid e Food
Bloemfontein
Cambrid e Food
JHB CBD
QwaQwa Cash and Ca
QwaQwa
Rhino Cash and Ca
Lusikisiki
Rhino Cash and Car
Umlazi
Rhino Cash and Car
Umzinto
Rhino Cash and Ca
Fla staff
Klerksdo Cash and Ca
Klerksdorp