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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM178Feb22
In the matter between:
Project Oxygen Bidco Proprietary Limited Acquiring Firm
and
Long4Life Limited
Target Firm
[1] On 12 May 2022, the Competition Tribunal (“Tribunal”) unconditionally approved a
large merger wh erein Project Oxygen Bidco Proprietary Limited (“OMPE Bidco”)
intends to acquire all the issued ordinary shares in Long4Life Limited (“L4L”). Post -
merger, OMPE Bidco will acquire sole control over L4L.
Parties to the Transaction and their activities
Primary Acquiring Firm
[2] The primary acquiring firm is OMPE Bidco, an international long -term savings,
insurance, banking, and investment group, offering a range of financial products and
services. Relevant to the proposed transactions are Old Mutual Private Equity
(“OMPE") ’s interest held through its private equity division, represented by OMPE V
Panel : Yasmin Carrim (Presiding Member)
: Enver Daniels (Tribunal Member)
: Thando Vilakazi (Tribunal Member)
Heard on : 12 May 2022
Order issued on : 12 May 2022
Reasons issued on : 17 May 2022
REASONS FOR DECISION
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GP Proprietary Limited (“ OMPE V”)1, in companies involved in the supply of certain
footwear apparel and equipment via Alderbalm Trading Proprietary Limited
(“Morecorp”), Footgear Holdings Proprietary Limited (“Footgear”) and in the supply of
beverages contract packing services through Middle Road Packers Proprietary Limited
(“In2Food”).
[3] Morecorp is active in the provision of sport, leisure and wellness business primarily
involved in the specialty retail of golf and cycling equipment while Footgear is a retailer
of primarily branded sport lifestyle footwear focused on the value segment of the
market.2 In2Food is a parent company of a food processing firm which also produces
a diversified food portfolio including fresh and prepared produce, prepared
convenience meals, fresh juices, snack products and baked goods.
Primary Target Firm
[4] The primary target firm is L4L, a public company incorporated in accordance with the
laws of South Africa and listed on the securities exchange operated by the JSE Limited
(“JSE”). L4L is a lifestyle themed investment holding company invested in a portfolio
of assets, which incorporates retail, wholesale, manufacturing, service, merchandising,
distribution, and e-commerce.
[5] L4L also operates within three core divisions which are spo rts and recreation,
beverages and personal care and wellness. Relevant to the proposed transaction, are
L4L’s activities underlying assets engaged in the supply of certain footwear , apparel,
and equipment through Holdsport Proprietary Limited (“Holdsport”),3 and Shelflife,4 as
well as the supply of beverages contract packing services through Chill Beverages
Proprietary Limited and Inhle Beverages Proprietary Limited.5
Proposed Transaction
[6] OMPE Bidco has offered to acquire control of L4L through the acquisition of all L4L’s
issued ordinary shares, by way of a scheme of arrangement. Upon implementation of
this, all the issued shares in L4L will be delisted from the JSE . Post-merger, OMPE
this, all the issued shares in L4L will be delisted from the JSE . Post-merger, OMPE
Bidco will acquire sole control over L4L.6
Competition Assessment
[7] The Commission considered the activities of the merging parties and found that there
is a horizontal and vertical overlap between their activities. The horizontal overlap
arises in that L4L (through its sports and recreation division) and OMPE offer s sports
and outdoor footwear and apparel in South Africa. The vertical overlap arises in that
the mer ging parties are also distributors/wholesalers of some of the products they
1 OMPE V is the ultimate general partner of OMPE Fund V, a private equity fund that invests
in high quality unlisted companies that display growth potential. OMPE Fund V has 37% B -
BBEE ownership.
2 Trading through The Pro shop and Cycle Lab.
3 Holdsport comprises of Sportsmans Warehouse, Outdoor Warehouse and Performance
Brands collectively form L4L’s sports and recreation division.
4 Through Shelflife, L4L retails premium ‘limited release’ sneakers and streetwear.
5 Chill Beverages and Inhle Beverages collectively form of L4L’s beverages divisions.
6 Merger Recommendations, p17 of 55, para [9] and para [10].
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retail. In this regard, L4L through Performance Brands is active in the wholesale supply
of certain sporting, outdoor and lifestyle apparel to retailers including OMPE (through
Morecorp).
[8] The Commission assessed the effect of the proposed merger in the broad markets for
the retail of apparel and narrow markets in certain activities or sporting codes as
follows:
[8.1] In the provision of sports and outdoor goods in South Africa;
[8.2] In the provision of performance footwear in South Africa;
[8.3] In the provision of outdoor footwear in South Africa;
[8.4] In the provision of performance apparel in South Africa;
[8.5] In the golf footwear, apparel, and equipment in South Africa; and
[8.6] In the provision of cycling footwear, apparel, and equipment in South Africa.
[9] The Commission found that the merging parties’ market shares are too low to have a
significant effect on competition in the market segments listed above because they are
characterized by strong competition from a myriad of competitors.
[10] The Commission further found that the merg ing parties are not each other’s close
competitors as OMPE (through The Pro Shop ) is active in a niche specialist golf
products where it mainly competes with the Golfers Club. The Pro shop retailers have
the most comprehensive range of brands in South Africa. In comparison, L4L through
Sportsmans Warehouse sells a limited range of golf footwear, apparel and equipment
targeted at beginners and school sports.
[11] In relation to the vertical overlap, the Commission found that the proposed transaction
is unlikely to result in significant foreclosure conc erns as Performance Brands is a
smaller player . After considering the above, the Commission concluded that the
proposed transaction is unlikely to result in any substantial prevention or lessening of
competition in the relevant markets.
Third Party Concerns
[12] The Commission received several concerns from competitors of the merging parties.
[12] The Commission received several concerns from competitors of the merging parties.
The concerns raised related to, inter alia, that the proposed transaction will consolidate
the market leaders and this will result in the merged entity leveraging its strong in -
house international brand offering and using Sportsmans Warehouse to extend its
reach in the cycling and golf markets . The retailing of sporting pr oducts generally is
brand reliant. The merged entity will have the ability to attain and acquire more brands
through their distribution which may limit the avail ability of such brands in the market
to other retailers and distributors. Furthermore, the merged entity will be able to offer
a wider range from the Performance Brands house to grow the clothing and footwear
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offering in their Cycling retail groups . This will result in constraints for some retailors’
access to a wide range of brands.7
[13] In response to the concerns raised, the merging parties submitted that their respective
in-store brand offers are mostly aimed at distinct target markets, and Sportsmans
Warehouse has limited scope to undertake more items supplied by Morecorp that are
not currently part of Sportsmans Warehouse's offering. Furthermore, the Acqu iring
Group has no intention of converting Sportsmans Warehouse into a high-end specialist
golf and cycling retailer as this is not aligned with its business model.8
[14] Regarding the concern of consolidating market leaders, the merging parties submitted
that the competitors have erroneously suggested that Morecorp has a shareholdings
interest in the brands business of Global Golf.9 The Commission further found that the
brands which are exclusively distributed by the merging parties are not within the same
sporting codes in South Africa. After assessing the above, the Commission found that
the proposed transaction is unlikely to result in anti-competitive brand consolidation as
suggested by the competitors.
Public Interest
Effect on Employment
[15] The merging parties submitted that due to the duplication in th eir activities, the
proposed transaction is likely to result in a maximum of 10 (ten) job losses for L4L
employees. The merging parties submitted that affected employees are all well -
positioned to find new jobs since they occup ied positions of top management, mid -
management, or were otherwise skilled.
[16] The Department of Trade, Industry and Competition (“dtic”) filed a Notice of Intention
to Participate in the proposed transaction . The dtic requested the merging parties to
commit to retaining the jobs of the four skilled and semi-skilled people, as well as some
of the higher-level positions. Furthermore, the merging parties should also commit to
of the higher-level positions. Furthermore, the merging parties should also commit to
maintain at least the same aggregate number of employees at the merged entity’s -
controlled investee companies (operational divisions), at the approval date of the
merger, for a period of no less than five years, which according to the merger filing
stood at 1 625 employees.10
[17] In response to the dtic’s request, the merging parties submitted that affected
employees have signed voluntary separation agreement s (“VSAs”) (conditional upon
the successful implementation of the proposed transaction). In relation to the
commitment to maintain the same aggregate number of employees, the merging
parties submitted that the acquiring firm has undertaken not to have any merger -
related retrenchments , the correct number being 2827. Furthermore, the merg ing
parties submitted that the undertaking given is sufficient therefore the onerous
7 Merger Record, p1630 of 1688, para [16].
8 Merger Recommendations, p39 of 55, para [75] and [76].
9 The part of the Business of Global Golf dealing with agency rights for golf retailer brands was
not acquired by Morecorp and therefore remains with previous owner.
10 Merger Record, p1649 of 1688.
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commitment to retain a specific number of employees requested by dtic is not
warranted.11
[18] The Commission raised concerns in relation to the above-mentioned retrenchments
and engaged with the parties . The merging parties subsequently agreed to offer
redeployment to two semi-skilled employees within the OMPE Bidco or to accept the
VSAs that have been offered to them . In respect of the other two employees, it
emerged that one had immigrated to the United Kingdom and the other was only a
temporary employee.
[19] Considering the above, the Tribunal concludes that the proposed transaction does not
raise any employment concerns.
Effect on Spread of Ownership
[20] The Commission also assessed the effects of the merger on a greater spread of
ownership. The merging parties submitted that pre-merger, the L4L had a near zero
HDP ownership and the OMPE Fund V has 37% B-BBEE ownership which provides it
with the ability to contribute 37% B -BBEE ownership. 12 Accordingly, the proposed
merger will positively promote HDP ownership, as contemplated by section 12A(3)(e)
of the Competition Act.
Other public interest concerns
[21] The proposed transaction raised no other public interest concerns
Conclusion
[22] We find that the proposed transaction is unlikely to substantially prevent or lessen
competition in any relevant market. Furthermore, the proposed transaction raises no
public interest concerns.
17 May 2022
Ms Yasmin Carrim
Date
Concurring: Mr Enver Daniels and Dr Thando Vilakazi
Tribunal Case Managers: Sinethemba Mbeki and Makati Seekane
For the Merging Parties: Susan Meyer and Preanka Gounden of
Cliffe Dekker Hofmeyr
For the Competition: Busisiwe Ntshingila and Themba Mahlangu
11 Merger Record, p1653 of 1688, para [2.4].
12 Merger Recor d, p92 of 1688 , para [9.5]. L4L Integrated Report, Merger Record, p605 of
1688.
Reason:Witnessing Yasmin Tayob Carrim
Signed by:Yasmin Tayob Carrim
1688.
Reason:Witnessing Yasmin Tayob Carrim
Signed by:Yasmin Tayob Carrim
Signed at:2022-05-17 08:47:08 +02:00
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