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Case no: LM011Apr21
In the matter between:
And
Texmex 57 (Pty) Ltd Primary Acquiring Firm
Bidvest Car Rental (Pty) Ltd Primary Target Firm
REASONS FOR DECISION
Conditional approval
[1] On 23 June 2021, the Competition Tribunal (“Tribunal”) conditionally approved
the proposed transaction in terms of which Texmex 57 (Pty) Ltd (“NewCo”)
intends to acquire the entire issued share capital of Bidvest Car Rental (Pty)
Ltd (“BCR”), as well as all shareholder loan claims against BCR. Upon
implementation of the proposed transaction NewCo will own and control BCR.
[2] The acquiring firm is NewCo, a newly acquired firm and a consortium comprised
of the following shareholders: (i) Mortimer Thesele Group (Pty) Ltd (“MTG”); (ii)
Hallmark Motor Group (Pty) Ltd (“Hallmark”); and (iii) an SPV (yet to be
established) to be controlled by certain individuals of the management team at
BCR. MTG is jointly controlled by Mortimer Motors (Pty) Ltd (“Mortimer”) and
Thesele Group (Pty) Ltd (“Thesele”). Hallmark is controlled by Cargo Carrier
Holdings (Pty) Ltd (“Cargo Carrier”).
[3] NewCo currently has no business activities. MTG operates two vehicle
dealerships, namely, Mortimer Toyota, Dundee and UD Trucks, Queenstown.
Mortimer is a multi-brand, franchised motor vehicle dealership group currently
operating numerous dealerships primarily situated in KwaZulu-Natal and the
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Free State. Thesele’s activities relating to short- and long-term truck hire and
related services are relevant for the competition assessment of the proposed
transaction. Hallmark primarily owns and operates motor vehicle dealerships in
various locations across South Africa.
[4] The target firm is BCR, a wholly owned subsidiary of Bidvest Group Ltd
(“Bidvest”).
[5] BCR provides the following services: (i) short-term vehicle rental services; (ii)
van and truck rental services; (iii) door-to-door transfer services; (iv) chauffer
drive services; and (v) coach charter services. BCR also has limited
involvement in the provision of long-term vehicle leasing solutions, which entails
acquiring and leasing vehicles to corporate customers that have a need for a
fleet of vehicles but wish to do so on an outsourced basis that does not entail
vehicle ownership.
Competition assessment
[6] The Competition Commission (“Commission”) assessed the activities of the
merger parties in the following (potential) relevant markets:
(i) the national (broad) market for the rental/leasing of all commercial
vehicles;
(ii) the national market for the rental/leasing of light commercial
vehicles; and
(iii) the national market for the rental/leasing of medium commercial
vehicles.
[7] In the (broad) product market for the rental/leasing of all commercial vehicles,
and the (narrower) product market for the rental/leasing of light commercial
vehicles, the Commission found that the merging parties will have estimated
market shares of less than 25% in South Arica. In the (narrower) product market
for the rental/leasing of medium commercial vehicles, the Commission found
that the merging parties will have an estimated market share of [25-35]% in
South Africa, with a small accretion as a result of the proposed transaction of
approximately 1%.
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[8] We note that none of the customers and competitors contacted by the
Commission raised any concerns with the proposed transaction.
[9] Given the above market shares and that the merging parties will face
competition from various other players in all the affected markets, the
Commission concluded that the proposed transaction is unlikely to substantially
prevent or lessen competition in any relevant market.
[10] The Commission further found that the proposed transaction presents a vertical
overlap since the acquiring firms (Mortimer and Hallmark) purchase or intend
to purchase second-hand car stock from BCR. The Commission however found
that the proposed transaction is unlikely to result in input foreclosures since
there are numerous alternative sources for used car stock. The Commission
further found that the proposed transaction is unlikely to result in customer
foreclosure because Mortimer and Hallmark largely rely on trade-ins and do not
have any contracts in place for the supply of used vehicles.
[11] Given the above, we concur with the Commission that the proposed transaction
is unlikely to substantially prevent or lessen competition in any relevant market.
Public interest
Employment
[12] The merging parties submitted that there will be no adverse effect on
employment as a result of the proposed transaction since there will be no
merger-specific retrenchments.
[13] However, the Commission noted that pre-merger BCR engaged in
retrenchments. In total 663 permanent BCR employees out of a total permanent
staff complement of 1168 were forcibly retrenched in the period September to
December 2020. An additional 85 employees took voluntary retrenchment
packages.
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[14] The Commission’s investigation found that the above retrenchments are likely
due to the impact of the Covid-19 pandemic on BCR. It considered the
significant decline in the revenue of BCR and concluded that it is unlikely that
these retrenchments are linked to the merger.
[15] The Department of Trade, Industry and Competition (“DTIC”) submitted that the
pandemic induced downturn in the tourism and business travel sectors, both
locally and internationally is likely to ease over the coming months as mitigation
measures against the pandemic such as the vaccine roll-out programme are
implemented. The DTIC suggested that the merging parties should institute as
a commitment/condition of the merger that when suitable employment
opportunities become available, the acquiring firm will in the first instance make
offers of employment to suitably qualified retrenched employees of BCR from
the date of approval of the merger and for a period of 24 months post the
lockdown.
[16] Following engagements between the merging parties and the Commission, the
merging parties agreed to a commitment to offer employment opportunities,
under certain conditions, to the retrenched BCR employees for a period of 12
months following the implementation of the merger. The Commission
recommended that the transaction should be approved subject to this condition.
[17] Given the number of recent retrenchments at the target firm and the current
state of the economy due to the Covid-19 pandemic, the Tribunal requested the
merging parties to give consideration to committing to the abovementioned
employment condition for a period of 24 months instead of a period of 12
months.
[18] The merging parties submitted that BCR has been instrumental in ensuring that
the retrenched employees find alternative employment, facilitating that
approximately 75 of retrenched workers were taken over by another service
provider in the industry. Furthermore, BCR submitted that it has already, in just
provider in the industry. Furthermore, BCR submitted that it has already, in just
the past few months, re-employed a material number of employees. 37 of the
retrenched employees have been recalled and given employment in the past
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few months. The merging parties however, on a purely voluntary basis, agreed
to if any employment opportunities arise within BCR, offer employment
opportunities, under certain conditions (as set out in the Tribunal’s order), to the
retrenched BCR employees for a period of 24 months following the
implementation date of the proposed transaction.1
Other public interest considerations
[19] The proposed transaction does not raise any other public interest concerns.
Conclusion
[20] In light of the above, the proposed transaction was approved subject to the
employment-related conditions attached hereto as “Annexure A”.
13 August 2021
Mr Andreas Wessels Date
Ms Yasmin Carrim and Mr Halton Cheadle concurring
Tribunal Case Manager : Kgothatso Kgobe
For the Merging Parties : P Cleland and S Rodze of Werksmans
For the Commission : B Mabatamela and R Maphwanya
1 We note that the merging parties’ undertakings exclude the affected employees who have found
alternative employment and those who will have elected to opt out from receiving vacancy
communications during the period of the undertakings’ operation.