COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM062Jul22
In the matter between:
Motus Group Limited Acquiring Firm
and
Sandown Motor Holdings (Pty) Ltd Target Firm
Approval
[1] On 19 October 2022, the Competition Tribunal ( unconditionally
approved the large merger wherein Motus Group Limited Motus Group
intends to acquire the business of three Mercedes-Benz passenger vehicle
dealerships and one commercial vehicle dealership as well as a portion of an
administrative that services these dealerships from Sandown Motor Holdings
Holdings Upon implementation
of the proposed transaction, Motus Group will acquire sole control over Sandown
Motor as envisaged by section 12(2)(a) of the Competition Act 89 of 1998, as
amended ).
Panel : Shaista Goga (Presiding Member)
: Mondo Mazwai (Tribunal Panel Member)
: Andiswa Ndoni (Tribunal Panel Member)
Heard on : 19 October 2022
Order issued on : 19 October 2022
Reasons issued on : 14 November 2022
REASONS FOR DECISION
Parties to the transaction and their activities
Primary Acquiring Firm
[2] The primary Acquiring Firm is Motus Group Limited . Motus
Group is wholly owned and controlled by Motus Holdings Limited (Motus
Holdings), a public company listed on the Johannesburg Stock Exchange.
[3] Motus Holdings is not directly or indirectly controlled by any firm.
[4] Shareholders that hold in excess of 5% shareholding as at 30 June 2021 in
Motus Group are Public Investment Corporation (South Africa) 12.02%,
Ukhamba Holdings (Pty) Ltd (South Africa) 9.04%, M&G Investment
Management (UK) 7.17%, Ninety-One (South Africa) 6.17% and Visio Capital
Management (South Africa) 5.42%.
[5] All firms directly and indirectly controlled by Motus Group are collectively
referred to as the
[6] The Acquiring Group is involved in vehicle importation, vehicle distribution and
dealership, vehicle rental, after-market and vehicle related financial services
predominantly through its network of dealerships across South Africa.
Primary Target Firm
[7] The primary Target Firm is Sandown Motor Holdings (Pty) Ltd
, in respect of the business consisting of three Mercedes-Benz
passenger vehicle dealerships in Sandton, Bryanston, and Constantia Kloof,
one commercial vehicle dealership in Roodepoort and a portion of an
administrative function located in Bryanston that services such dealerships.
[8] Sandown Motor Holdings is wholly owned and directly controlled by Mercedes-
Benz South Africa Limited (Mercedes-Benz SA).
[9] All firms directly and indirectly controlled by Sandown Motor Holdings, are
1
[10] The Target Group is involved in the sale of new and used Mercedes-Benz
passenger, LCVs, as well as other commercial vehicles, like Fuso and
Mercedes-Benz trucks. It is active in the servicing of the vehicles and other
commercial vehicles (i.e., Mercedes-Benz buses and Freightliners). The Target
1 Sandown Motor Holdings does not directly or indirectly control any firm.
Group also provides related aftersales parts and services in Gauteng. The
Target Group operates as an agent for Mercedes-Benz SA.
Proposed transaction and rationale
Transaction
[11] In terms of the proposed transaction, the Acquiring Group intends to acquire the
Target Group from Sandown Motor Holdings as a going concern. Post-merger,
the Acquiring Group will own and control the Target Group. The Acquiring Group
will exercise sole control over the Target Group, as envisaged by section
12(2)(a) of the Act.
Rationale
[12] The Acquiring Group submits that the Motus Group considers Mercedes-Benz
to be a prestigious vehicle brand.
[13] The Target Group submits that the proposed transaction is likely to provide an
opportunity for the Target Group to continue its growth and development.
Relevant market and impact on competition
[14] In respect of the products market, both Motus and the target dealerships sell
activities overlap with respect to light commercial vehicles, medium commercial
vehicles, and heavy commercial vehicles.
[15] Motus sells new passenger and commercial vehicles throughout South Africa
whereas the target dealerships are located in Gauteng Province. Therefore, of
relevance to the proposed transaction dealerships in Gauteng Province. The
target dealerships comprise of four dealerships, while there are Motus
dealerships in Gauteng Province.
to be a prestigious vehicle brand.
s, while there are Motus
[16] The Competition Commission the considered the activities of
the merging parties and found that the proposed transaction results in a
horizontal overlap in the markets of the sale of new passenger vehicles and new
light commercial vehicles within a 50km radius of the target dealerships, sale of
new medium commercial vehicles and new heavy commercial vehicles in
Gauteng Province, the sale of used vehicles and after sales services.
The market for the sale of new passenger vehicles within a 50km radius of the
Target Dealerships
[17] The merged entity will have an estimated market share in the range of 10% to
30% with an accretion in the range of 1% to 10% within a 50km of the target
dealerships. Considering the small accretion in market share, the Commission
is of the view that the proposed transaction is unlikely to substantially prevent or
lessen competition in this market. Further, the merged entity will continue to face
competition from a number of alternative dealerships in this market such as
The market for the sale of new light commercial vehicles within a 50km radius
of the target dealerships
[18] The merged entity will have an estimated market share in the range of 20% to
40% with an accretion in the range of 1% to 10% within a 50km of the target
dealerships. Considering the small accretion in market share, the Commission
is of the view that the proposed transaction is unlikely to substantially prevent or
lessen competition in this market. Further, the merged entity will continue to face
competition from a number of alternative dealerships in this market such as
The market for the sale of new medium commercial vehicles in Gauteng
Province
[19] The merged entity will have an estimated market share of in the range of 10%
to 40% with an accretion in the range of 1% to 10% within Gauteng. Considering
the small accretion in market share, the Commission is of the view that the
proposed transaction is unlikely to substantially prevent or lessen competition in
proposed transaction is unlikely to substantially prevent or lessen competition in
this market. Further, the merged entity will continue to face competition from
several alternative dealerships in this market such as
The market for the sale of new heavy commercial vehicles in Gauteng Province
[20] The merged entity will have an estimated market share in the range of 10% to
40% with an accretion in the range of 1% to 10% in Gauteng Province.
Considering the modest accretion in market share, the Commission is of the
view that the proposed transaction is unlikely to substantially prevent or lessen
competition in this market. Further, the merged entity will continue to face
competition from a number of alternative dealerships in this market such as
Intra-brand competition in the market for the sale of passenger vehicles
[21] Within 50km of the Target Dealerships, the Commission notes that there are
approximately 13 Mercedes-Benz Dealerships. Motus owns Mercedes-
Benz passenger vehicles dealerships and is acquiring three additional
Mercedes-Benz passenger vehicles dealerships. Motus will own of
dealerships within a 50 km radius of the Target Dealerships. In Gauteng as a
whole, the merging parties will have an estimated market share in the range of
30% to 50% in the sale of Mercedes Benz passenger vehicles based on the
number of vehicles sold.
[22] The Commission notes that Mercedes Benz sold total of passenger
vehicles in 2021, Motus dealerships account for vehicles whereas the
Target Group account for This implies that the merged entity will account
for passenger vehicles out of a total of passenger vehicles.
Therefore, the merged entity will have an estimated market share of in the range
of 20% to 50% in the sale of Mercedes Benz passenger vehicles. Considering
the high market shares, the Commission was concerned of potential unilateral
effects in the sale of Mercedes Benz passenger vehicles.
[23]
Motus owns
Benz passenger vehicles dealerships. Motus will own of
The Commission notes that Mercedes Benz sold total of passenger
vehicles in 2021, Motus dealerships account for vehicles whereas the
for passenger vehicles out of a total of passenger vehicles. for passenger vehicles out of a total of passenger vehicles.
Provision of aftersales maintenance services for in warranty and out of
warranty Mercedes Benz vehicles in the relevant geographic markets
[25] Given that the merged entity will have a substantial market share in the sale of
Mercedes Benz passenger vehicles in the relevant geographic market, the
Commission considered the potential unilateral effects that might arise as a
result of the merger on labour rates for vehicles that are (i) in maintenance plan,
service plan or warranty and (ii) out of warranty or out of service plan or
maintenance plan.
[26] The Commission understands that dealerships receive a base labour rate and
key performance indicators ( KPIs ) which each have a rand value linked to
rate for a particular quarter. Therefore, a particular dealership could charge a
base labour plus the KPI achieved.
[27] The merging parties submit that the hourly labour rates vary on a quarterly basis
for vehicles that are in maintenance plan and under warranty as these are linked
to the achievement of KPIs that are set by Mercedes Benz SA.
[28]
The Tribunal sought clarity in respect of the
whether they are the rates charged to customers or whether they are the rates
paid to providers. The merging parties submitted that the labour rates refer to
the rates charged to a retail customer when it procures repair services from
either of the merging parties in respect of Mercedes-Benz passenger cars or
commercial vehicles that are under warranty or service plan and those that are
not covered by warranty or service plan.
[29] The Commission's analysis showed that the difference in labour rates between
the Acquiring Group and Target Group
not significant.
Considering the above, the Commission is of the view that the proposed
transaction is unlikely to substantially prevent or lessen competition in this
market.
[1] The Commission also assessed margins.
The Commission
notes that the proposed transaction is likely to result in an increase in the
The Commission
notes that the proposed transaction is likely to result in an increase in the
margins charged for parts in the target dealerships. In light of this finding, the
Commission shared its concerns with the merging parties and also sought to
understand the reasons behind the differences in the margins.
[30] In response, the merging parties submit that the margins between Motus and
the target dealerships or Sandown are not materially different. Further, the
margins are determined by each individual dealership based on a range of
different factors, Motus does not expect that the margins of the target
dealerships will vary significantly from their current levels as a result of the
proposed transaction. The parties explain that the difference in the margins arise
due to differences between the merging parties accounting, trading policies, and
the particular mix of products/services provided at each individual dealership.
[31] Considering the above, the Commission notes is of the view that the margins
are not significantly different. Further, Mercedes-Benz provides a recommended
retail price for all parts. As such, the Commission is of the view that the proposed
transaction is unlikely to substantially prevent or lessen competition in the
relevant market. In addition, there are dealerships located in close proximity to
should the parties increase their margins to a significant level.
[32] The Commission notes that there exists strong inter-brand competition which
can off-set a potential reduction in intra-brand competition. Mercedes-Benz
competes with the likes of BMW and Audi amongst others.
Intra-brand competition in the market for the sale of commercial vehicles
[33] The Commission and Tribunal have previously made findings that the market for
commercial vehicles is national because the customer profile of commercial
vehicle buyers is different from that of passenger vehicles. The typical
commercial vehicle customer would be a firm buying several vehicles for its fleet
which are also much more expensive; these customers are unlikely to be
reluctant to spend the extra time in travelling to source the best deal. The
Commission is of the view that the proposed transaction is unlikely to have a
negative effect in the sale of Daimler and/Mercedes Benz commercial vehicles.
negative effect in the sale of Daimler and/Mercedes Benz commercial vehicles.
[34] The Commission notes that Motus has an estimated market share in the range
of 10% to 20% the Target Group has a market share in the range of 1% to 10%.
Considering the above market shares, the Commission is of the view that the
proposed transaction is unlikely to result in intra-brand issues.
[35] Taking the above into consideration, the Commission is of the view that the
proposed transaction is unlikely to substantially prevent or lessen competition in
any market.
[36] When assessing the proposed transaction, the Competition Tribunal the
did not find any evidence suggesting that that the relevant market
should be broader than the one defined above.
Relevant counterfactual
[37] The Tribunal assessed the prospects for competition with the proposed
transaction against the competitive status quo without the proposed transaction.
Based on the above evidence, it concluded that there are no competitive
concerns raised.
[38] No third parties raised concerns regarding the effects of the proposed
transaction on competition.
[39] The Tribunal concludes that the proposed transaction is unlikely to substantially
prevent or lessen competition in any market.
Public interest
Effect on employment
[40] The Commission engaged with the merging parties who submitted that the
proposed transaction will not give rise to any retrenchments.
[41] The employees of the merging parties are represented by the National Union of
Metal and Workers (NUMSA) and the Motor Industry Staff Association
( MISA).
[42] MISA did not raise any concerns with the proposed transaction. NUMSA submits
that the merging parties should impose a condition on a perpetual freeze on job
losses. However, the merging parties are of the view that it would not be
appropriate to place any restrictions on retrenchments which are not merger-
specific and that this would be inconsistent with the approach applied by the
Commission and the Competition Tribunal.
[43] Further, NUMSA requested that the merging parties commit on a process that
will ensure harmonization of employment conditions and benefits of workers in
consultation with NUMSA post-merger at the cost of the merging parties. The
merging parties confirmed in a letter to NUMSA dated 18 August 2022, that
harmonization of terms and conditions of employment of NUMSA represented
employees will be done with the full involvement of Motus.
[44] Considering the above, and the fact that the merging parties have provided an
[44] Considering the above, and the fact that the merging parties have provided an
unequivocal statement that no job losses will arise as a result of the proposed
transaction, the Tribunal agrees that the
proposed condition is not necessitated by the merger and that the proposed
transaction is unlikely to have a negative effect on employment.
Effect on the spread of ownership
[45] The Commission engaged the merging parties on the manner in which the
proposed transaction promotes a greater spread of ownership, in particular, to
increase the levels of ownership by historically disadvantaged persons and
workers in firms in the market in terms of Section 12A(3)e of the Act.
[46] The merging parties submitted that overall, the proposed transaction will
promote a greater spread of ownership by historically disadvantaged persons
and/or workers. The Target Group currently has no direct shareholding by
historically disadvantaged persons (HDPs). The shares in Motus Holdings are
widely held and freely traded, including by HDPs.
[47] The Commission notes that according to the BEE certificate of Motus, black
people hold 37.96% of the voting rights in Motus and 30.56% of the economic
interest. Therefore, the proposed transaction is likely to have a positive effect on
the promotion of a greater spread of ownership as the Target Group does not
currently have any BEE shareholdings.
[48] NUMSA requested the merging parties to provide an unencumbered 10% equity
ownership by workers to be facilitated through an Employee Share Ownership
Plan (ESOP), NUMSA is of the view that the ESOP should be established
within 12 months after the approval date in consultation with NUMSA and their
advisors at the cost of the merging parties. The merging parties are do not deem
it necessary to create an ESOP as they are of the view that the proposed
transaction will have a positive effect on the promotion of a greater spread of
ownership. Further, the employees of the Target Group, by virtue of forming part
of the Acquiring Group will benefit from impactful and transformative corporate
initiatives relating to transformation governance, ownership, employment equity,
initiatives relating to transformation governance, ownership, employment equity,
supplier enterprise development and socio-economic development.
[49] The Target Group currently has no direct shareholding by HDPs. However, the
Acquiring Group in this instance, through Motus Holdings, is a listed entity and
its shares are widely held and freely traded, including by HDPs.
[50] The Tribunal inquired how the Commission and the merging parties measured
the spread of ownership or dilution beyond comparing the total percentage of
HDP ownership. In response, the merging parties advised that there is an
absolute increase in shareholding as the Target Group is currently indirectly
wholly owned by a single offshore entity. Accordingly, there will be a positive
impact on the spread of ownership as Motus is a listed entity, whose shares are
widely held including by HDPs. Furthermore, the merging parties provided the
as a means of estimating
by HDPs.
[51] The Commission is of the view that it is unlikely that the proposed transaction
will have a negative effect on the spread of ownership. The Tribunal agrees with
this assessment.
[52] The Commission found that the proposed transaction raised no further public
interest concerns, and the Tribunal concurs.
Conclusion
[53] Considering the above, the Tribunal concludes that the proposed transaction is
unlikely to substantially prevent or lessen competition in any relevant market.
Accordingly, we approve the proposed transaction unconditionally.
14 November 2022
Ms Shaista Goga Date
Concurring: Ms Mondo Mazwai and Ms Andiswa Ndoni
Tribunal case managers
: Theodora Michaletos and Baneng Naape
For the merging parties
: Heather Irvine of Bowmans Law
For the Commission Billy Mabatamela and Ratshidaho Maphwanya