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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM132Dec21
In the matter between:
ARDAGH GROUP S.A Acquiring Firm
and
CONSOL HOLDINGS PROPRIETARY LIMITED Target Firm
[1] On 29 April 2022, the Competition Tribunal (“Tribunal”) conditionally approved the
acquisition by Ardagh Group S.A (“Ardagh”) of 100% of the issued shares in Consol
Holdings Proprietary Limited (“Consol”).
[2] The reasons for the conditional approval follow.
Parties to the Transaction and their activities
Primary Acquiring Firm
[3] The primary acquiring firm is Ardagh a private company registered in Luxembourg.
Ardagh is the holding company of the Ardagh group of companies. Ardagh is indirectly
owned by ARD Holdings S.A (“ARD Holdings”). The majority shareholdings in ARD
Panel : Yasmin Carrim (Presiding Member)
: Sha’ista Goga (Tribunal Member)
: Andreas Wessels (Tribunal Member)
Heard on : 28 April 2022
Order issued on : 29 April 2022
Reasons issued on : 12 May 2022
REASONS FOR DECISION
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Holdings are held by Yeoman Capital S.A holding 34% and Paul Coulson holdings
25%.1
[4] Ardagh, inter alia, manufactures glass packaging (such as beverage bottles and glass
jars) and metal packaging products. The glass packaging business also includes an
engineering business which sells glass manufacturing equipment (through its
subsidiary Heye International GmbH (“Heye”) and the sale of glass moulds (through
its subsidiary UniMould GmbH (“UniMould”).
Primary Target Firm
[5] The primary target firm is Consol a firm incorporated in accordance with the laws of
South Africa. The shareholding in Consol is held by Brait Private Equity, Old Mutual
Life Assurance Company South Africa Limited, Sanlam Life Insurance Limited,
HarbourVest Private Equity Fund, The Public Investment Corporation SOC Limited
(Government Employee Pension Fund) and
[6] Consol is a manufacturer and supplier of glass packaging for the food and beverage
industries including the beer, alcoholic beverage, wine, fruit juice, soft drinks, mineral
water, and spirits industries, as well as for pharmaceuticals and cosmetics industries.
Consol also has a small retail presence, supplying (empty) glass containers to various
retailers for sale to consumers. Its retail products also include branded water bottles.
[7] Consol has operations throughout South Africa and operates four manufacturing
facilities with 11 furnaces and 29 production lines. These four glass manufacturing
plants are in Bellville, Western Cape, and Clayville, Nigel, and Wadeville, Gauteng.
Consol operates two glass waste processing plants at the Belville and Clayville
facilities from which it processes most of the cullet requirements.
[8] In addition, Consol owns and operates a silica sand mine to supplement / ensure
adequate supply of silica sand (the main raw material input) for its glass manufacturing
facilities.
[9] Consol also has subsidiaries and glass manufacturing facilities operating in Nigeria,
[9] Consol also has subsidiaries and glass manufacturing facilities operating in Nigeria,
Kenya, and Ethiopia. Ardagh will thus also acquire (indirect) control over these other
African operations.
Proposed Transaction
[10] The proposed transaction is an international transaction and is notifiable in 4 (four)
jurisdictions including South Africa. To date, the proposed transaction has been
approved without conditions in Kenya and Nigeria, the filing to Ethiopia is pending.2
1 Ardagh does not have any shareholdings by Historically disadvantaged Persons. In addition,
Ardagh does not have any Employee Share Ownership Plan.
2 Merger Recommendations, p4 of 78, para [2].
(Government Employee Pension Fund) and
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[11] In terms of the proposed transaction before the Tribunal, Ardagh intends to acquire
100% of the issued shares in Consol. Post-merger, Ardagh will have sole control over
Consol.
Competition Assessment
[12] The Commission assessed the effect of the proposed merger on the following markets:
The upstream international market for the manufacturing and supply of glass
equipment and the downstream market for the manufacturing and supply of glass
packaging products can also be defined narrowly according to the targeted customers
e.g., Food market focusing on wide mouth jars or glass and beverage market looking
at narrow mouth bottles.
[13] The Commission considered the activities of the merging parties and found that there
is a horizontal and vertical overlap between their activities.
[14] The horizontal overlap is in respect of the supply of glass packaging products in South
Africa as the merger parties supply glass packaging products in South Africa. However,
the Commission found that Ardagh does not have any manufacturing facilities in South
Africa and as such the glass packaging supply in South Africa is limited to the
exportation by Ardagh to its main customer,
[15] The vertical overlap arises because Ardagh, through its German-based subsidiary
Heye, has supplied glass manufacturing equipment to Consol. Consol used the glass
manufacturing equipment procured from Heye to produce glass packaging products in
South Africa. There is no local supplier of glass manufacturing equipment in South
Africa, and these have to be imported by a specific customer. Accordingly, the
Commission found that the transaction was unlikely to raise customer foreclosure
concerns because all glass manufacturing equipment are imported by the relevant
customer into South Africa.3
[16] The Commission concluded that the proposed transaction does not substantially
prevent or lessen competition in any relevant market. We concur with the findings.
Third Party Concerns
Third Party Concerns
[17] During its investigation, the Commission received several concerns from competitors
and customers in the market the merging parties are active in. The concerns raised
related to, inter alia, the fact that Ardagh might stop producing wide jar bottles or food
jars in favour of narrow neck amber or green beverage bottles and this will affect
customers food supply. Further concerns raised were that the proposed transaction
will result in the elimination of a potential competitor and that Ardagh could have easily
come in as a greenfield entry because of its financial muscle and wide footprint.
Moreover, Ardagh could potentially shorten the South African market, given its size, to
stimulate and substitute their supply with imports from their international plants leading
to potentially heighten barriers to entry into this market and distort competition because
of predatory pricing which could result in serious constraints in the local market.
3 Merger Recommendations, p11 of 78, para [31].
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[18] In response to the concerns raised, the merging parties submitted that the food jar
production is a significant part of the target firms’ business revenue which Ardagh
would like to retain.4 Therefore, the concern that it will cease to supply food jars is
unfounded. The merging parties subsequently agreed to the imposition of a condition
in which they commit to continue with the production of food jars for a period of
7(seven) years post-implementation of the proposed transaction.
[19] Regarding the removal of a potential competitor, the merging parties submitted that
the proposed transaction will not result in a removal of a potential competitor, and it
will not have the ability to predate, as Ardagh has less than 1% market share in South
Africa and had no intention of investing in a greenfield manufacturing plant due to very
high barriers to entry. Therefore, it will step into the shoes of Consol, post-merger.5
[20] The Commission was satisfied with the merging parties’ response to the concerns
raised and concluded that the transaction will not result in the removal of a potential
competitor.
Public Interest Assessment
Effect on Employment
[21] The merging parties submitted that the proposed transaction will not result in any job
losses or retrenchments.
[22] The Chemical, Energy, Paper, Printing, Wood, and Allied Workers’ Union
(“CEPPWAWU”) raised concerns about job security and employment conditions.
These concerns were addressed by the merging parties upon meeting with
CEPPWAWU and confirmed by the Commission.6 The Commission and the merging
parties agreed to a condition not to retrench any employees for 2 (two) years and the
Commission shared the employment condition with the relevant trade unions. None of
the trade unions raised concerns regarding the condition except CEPPWAWU. 7
[23] CEPPWAWU submitted that the moratorium should be extended to 5 (five) years as
the merger will not result in job losses in the first place.8 The 2 (two) year period is very
the merger will not result in job losses in the first place.8 The 2 (two) year period is very
short and imposing a shorter period indirectly gives the merged firm freedom to
retrench employees after the expiry of the period.9 The merging parties submitted that
CEPPWAWU’s request was not in line with commitments given in this regard
nevertheless they are amenable to extending the moratorium to 3 (three) years in total.
Effect on Spread of Ownership
[24] The Commission also assessed the effects of the merger on greater spread of
ownership.
4 Merger Recommendation, p41 of 78, para [86].
5 Merger Recommendation, p41 of 78, para [86].
6 Merger Record, p950 of 947.
7 Merger Recommendation, p56 of 78, para [146].
8 Merger Recommendation, p56 of 78, para [146].
9 Merger Record, p942 of 947.
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[25] The parties indicated that of the 10.6% shareholding held by Sphere, 6.04% is
attributable to Historically Disadvantaged Persons (“HDP”) shareholders. Thus, Consol
has a direct B-BBEE shareholding of 10.79% on a flow-through basis held through
various shareholders as follows: Sphere 6.04%, Employee Share Ownership Plan
(“ESOP”) 4.49%, and management shareholders 0.26%.
[26] The Commission noted that, Sphere and the Management shareholders will sell their
shares in Consol to Ardagh. The ESOP will remain unaffected.
[27] The Commission raised concerns that the proposed transaction will have a negative
effect on the promotion of greater spread of ownership, as it will dilute the HDP
shareholding held in Consol. The merging parties submitted that they intend to
implement an additional ESOP post-merger to ensure that Consol maintains its direct
B-BBEE shareholding percentage of approximately 11% in aggregate on a flow
through basis. The New ESOP shall be established to hold 7 % of the issued shares
of Consol.10 The merging parties agreed to the imposition of a condition in this regard.
The proposed transaction will therefore not have any negative effect on ownership by
HDPs as it will restore the pre-merger levels.
[28] The Commission also shared the ESOP condition with the trade unions. The National
Union of Mineworkers (“NUM”) raised certain clarity seeking questions regarding the
design of the ESOP. 11 The merging parties have since provided the required clarity,
which NUM was satisfied with. CEPPWAWU indicated that it was satisfied with the
ESOP condition.
Effect on particular industrial sector or region
[29] The merging parties submitted that the proposed transaction will not have any negative
effect on Consol’s local procurement as the majority of Consol’s inputs are locally
procured. Where goods are locally available, it is not generally economically efficient
for Consol to import goods from abroad. The merging parties further submitted that
for Consol to import goods from abroad. The merging parties further submitted that
Consol’s existing support of local procurement will continue following implementation
of the Proposed transaction.12
[30] The merging parties further submitted that the proposed transaction will not reduce
glass packaging manufacturing capacity in South Africa. This is because the merging
parties committed to an investment to increase manufacturing capacity by
recommissioning the construction of the N2 Furnace Project, which will create 180
direct jobs. Approximately months after the finalisation of the N2
Furnace, they will commence construction of the N3 Furnace, which will result in the
creation of another additional 140 direct jobs. The merging parties submit that the
construction of the N3 Furnace constitutes a significant additional investment in glass
manufacturing capacity in South Africa that Ardagh is willing to undertake in the context
of implementing the proposed transaction.13
10 Merger Recommendations, p57 of 78, para [149].
11 Merger Record, p944 of 947.
12 Merger Recommendations, p60 of 78, para [163].
13 Merger Recommendations p59 of 78, para [157], para [158] and para [159]. See also
Annexure A: Conditions.
direct jobs. Approximately months after the finalisation of the N2
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[31] Ardagh will continue to rely on the skills and knowledge already within Consol, as the
proposed transaction will facilitate a transfer of additional skills and knowledge from
Ardagh to Consol and its employees. 14
[32] The merging parties further committed that Ardagh is focused on ensuring that the
local communities surrounding its facilities are uplifted through its work and
sustainability initiatives, particularly in the economic aftermath of the Covid-19
pandemic.
The ability of national industries to compete in international markets
[33] The merging parties submitted that the vast majority of Consol’s production in South
Africa is satisfied by local demand and approximately of Consol's South African
production is exported from South Africa to neighbouring countries. Furthermore, the
glass packaging is heavy and fragile, which results in high logistics and handling costs,
and import taxes may also apply. The import of glass packaging is economically
feasible only in circumstances where the product is sourced from countries with low
production costs. As a result, the proposed transaction will not lessen the level of
exports from South Africa and will therefore have a neutral effect in relation to the ability
of the South African glass packaging manufacturing industry to compete
internationally15
Effect of a merger on the ability of small businesses, or firms controlled or owned by historically
disadvantaged persons, to become competitive
[34] The merging parties submitted that the proposed transaction will have no negative
impact on the ability of small businesses, or firms controlled or owned by historically
disadvantaged persons, to become competitive. Moreover, Ardagh will maintain
Consol’s existing glass recycling initiatives which facilitate and result in socio-
economic, supplier and enterprise development and promote environmental
sustainability.16
[35] Ardagh committed to supporting glass recycling, increasing glass recycling rates,
[35] Ardagh committed to supporting glass recycling, increasing glass recycling rates,
diverting glass cullet from landfills, and assisting informal glass collectors. Ardagh will
ensure that Consol continues to purchase recycled glass or cullet for use in its
operations in the ordinary course, with preference given to HDPs, provided that the
cullet is able to be procured on commercially reasonable terms (particularly with
respect to quality standards, availability, and reasonably competitive commercial
terms).
14 Merger Recommendations, p61 of 78, para [170] and para [170].
15 Merger Recommendations, p63 of 78, para [176] and para [177].
16 Merger Recommendations, p63 of 78, para [179].
Africa is satisfied by local demand and approximately of Consol's South African
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The Hearing
[36] The Tribunal identified some inconsistencies in the draft conditions proposed by the
merging parties and the Commission regarding duration of the monitoring period. In
response, the Commission agreed that the duration of monitoring food jars was longer
than the period covered in the monitoring clause. The Commission submitted that it
would not have any difficulty with amending the monitoring period to align with the
duration of the food jar condition.
[37] In relation to the implementation of the ESOP to be established in line with the design
principles, the Tribunal questioned why the required engagement process between the
parties and the Commission was not included in the conditions and only appeared in
the monitoring clauses. In response, the Commission and the merging parties were
amenable to amending the clauses in relation with the Tribunal’s request.
Other public interest concerns
[38] The proposed transaction raised no other public interest concerns.
Conclusion
[39] We find that the proposed transaction is unlikely to substantially prevent or lessen
competition in any relevant market. The transaction however was approved on the
conditions agreed to by the merging parties.
12 May 2022
Ms Yasmin Carrim Date
Ms Sha’ista Goga and Mr Andreas Wessels concurring.
Tribunal case managers : Makati Seekane and Sinethemba Mbeki.
For the merging parties : Adv C Avidon, instructed by Judd Lurie of Bowmans
and Martin Versfeld and Shawn van der Meulen of
Webber Wentzel Attorneys.
For the Commission : Busisiwe Ntshingila and Themba Mahlangu.