COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM171Jan23
In the matter between:
TLG Investments (Pty) Ltd Acquiring Firm
and
Tradekor Holdings (Pty) Ltd
Target Firm
Approval
[1] On 13 March 2023, the Competition Tribunal (“Tribunal”) unconditionally approved the
large merger wherein Tradekor Holdings (Pty) Ltd (“Tradekor”) intends to buy back
shares held by Etymo (Pty) Ltd (“Etymo”), which will result in an increase of TLG
Investments (Pty) Ltd ’s (“TLG Investments”) shareholding in Tradekor . Upon the
implementation of the proposed transaction , TLG Investments will solely control
Tradekor and its subsidiaries.
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm, TLG Investments, is an indirect subsidiary of The Logistics
Group Ltd (“TLG”), which is in turn controlled by TLG Acquisition Holdings (Pty) Ltd
Panel: Jerome Wilson (Presiding Member)
Liberty Mncube (Tribunal Member)
Fiona Tregenna (Tribunal Member)
Heard on: 13 March 2023
Order issued on: 13 March 2023
Reasons issued on: 27 March 2023
REASONS FOR DECISION
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(“TLG Acquisition Holdings”). TLG Acquisition Holdings is in turn controlled by the
following firms–
(i) AIIF4 Partnership (“AIIF4”), acting through AIIF4 Seed General Partner (Pty) Ltd
(as to 37%);
(ii) Old Mutual Life Assurance Company (South Africa) Limited (“OMLACSA ”), in
respect of the pooled portfolio of assets of the Infrastructural, Developmental and
Environmental Assets Managed Fund (“IDEAS”) (as to 37%); and
(iii) Mokobela Shataki (Pty) Ltd (“Mokobela”) (as to 26%).
[3] AIIF4 and IDEAS are controlled by African Infrastructure Investment Managers (“AIIM”),
which is ultimately controlled by Old Mutual Limited (“OML”), a public company listed
on the Johannesburg Stock Exchange.1
[4] TLG Investments wholly controls The Logistic Company (Pty) Ltd (“TLC”) and Port
Stevedoring (Pty) Ltd; and has a 50% shareholding in the target firm, Tradekor.
[5] TLG investments, its subsidiaries and all its controlling firms are collectively referred to
as the “TLG Group”.
[6] Relevant to this transaction is FPT Group (Pty) Ltd (“FPT”), a subsidiary of TLG
Acquisition Holdings. FPT operates group terminal services from Gqeberha ( Port
Elizabeth), Cape Town, Durban, and Centurion; and its activities include the provision
of berths to shipping lines ; stevedoring; cargo administration ; containerisation;
warehousing; cold storage; transportation logistics; and terminal handling , amongst
others.
[7] In addition, TLG, owns a non-controlling 25% stake in Saldanha Dry Bulk Terminal (Pty)
Ltd (“Saldanha Dry Bulk Terminal”), which renders similar back-of-port services to those
of Tradekor. Saldanha Dry Bulk Terminal is a bulk storage company, situated within
the vicinity of Saldanha Harbour on the Cape West Coast.
Primary target firm
[8] The primary target firm is Tradekor, which is jointly controlled by TLG Investments (as
mentioned above) and Etymo (Pty) Ltd (“Etymo”).
mentioned above) and Etymo (Pty) Ltd (“Etymo”).
1 Shareholders which own more than 5% of OML’s issued share capital as of 31 December 2021 include Public
Investment Corporation as to 18.78%; and Allan Gray as to 10.50%.
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[9] Etymo is not controlled by any single firm or individual, and its shares are held by [list
of shareholder names]
[10] Tradekor wholly controls Tradekor PE (Pty) Ltd ; Tradekor Commodities (Pty) Ltd ;
Tradekor JHB (Pty) Ltd; and Tradekor Handling (Pty) Ltd. Tradekor and its subsidiaries
are collectively referred to as the “Target Group”.
[11] The Target Group provides logistics services to the commodities industry, specialising
in the trading, warehousing, containerising, and shipping of manganese, chrome, and
iron ore. Its trade depots are located in Gqeberha (Port Elizabeth), Bloemfontein and
Rustenburg.
Proposed transaction and rationale
Transaction
[12] In terms of the merging parties’ repurchase agreement, Tradekor intends to buy back
49% of its shares held by Etymo , which will result in an effective increase of TLG
Investments’ shareholding in Tradekor from 50% to 99%. Post-merger, TLG
Investments will solely control Tradekor and its subsidiaries.
Rationale
[13] [TLG Investments’ rationale]
[14] [Tradekor’s rationale]
Competition assessment
[15] The Competition Commission (“Commission”) considered the activities of the merging
parties and found no horizontal overlap as the TLG Group does not provide any services
in competition with Tradekor. While both TLG and Tradekor provide warehousing (inter
alia), their respective warehouses cater for different kinds of products. TLG warehouses
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store fruits and perishables , whereas Tradekor’s warehouses store manganese,
chrome, and iron ore. Furthermore, the Saldanha Dry Bulk Terminal (in which TLG
holds a non -controlling stake) does not operate in the same geographic location as
Tradekor.
[16] However, the Commission identified two vertical relationships between the merging
parties – the first being in relation to front-of-port services, and the second in relation to
back-of-port services, both restricted to the port of Port Elizabeth. As set out below, the
Commission investigated input foreclosure and customer foreclosure concerns in
relation to both of these overlaps.
Vertical overlap in relation to front-of-port services
[17] The TLG Group, via FPT, provides front-of-port services to Tradekor in the port of Port
Elizabeth. Front-of-port terminal services, also called “terminal hand ling”, include the
warehousing, handling, and delivery of cargo to the quayside for export. Front-of-port
services are a function that only companies with Terminal Operator Licences (issued
by Transnet) can perform. Tradekor does not have a Terminal Operator Licence, and
therefore makes use of FPT’s services to transport, warehouse and handle the cargo
from its back -of-port premises, through the port terminals and warehouses onto the
quayside so that it can be stevedored onto the vessels for export.
[18] For purposes of this overlap, the Commission considered the upstream market for the
provision of front-of-port services, and the downstream market for the procurement of
front-of-port services in the port of Port Elizabeth. FPT is active in the upstream market,
and Tradekor is active in the downstream market.
Input foreclosure
[19] As regards input foreclosure, the Commission assessed whether FPT would have the
ability and incentive to deal exclusively with Tradekor for the provision of front -of-port
services, such that other customers would be denied access to FPT as a provider of
services, such that other customers would be denied access to FPT as a provider of
front-of-port services, and whet her this would lead to a substantial lessening or
prevention of competition in the downstream market.
[20] The Commission found that there is a limited number of alternative suppliers active in
the upstream market in the port of Port Elizabeth given the lice nsing restrictions
applicable to the provision of services in that market. Transnet Port Terminals PE and
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Bid Port Operations/ Bidvest Port Services were identified as the only other providers
of front-of-port services in that market.
[21] As regards incentiv es, the Commission found that Tradekor is FPT’s main customer,
and accounts for just over [%] of FPT’s revenues from its provision of front-of-port
services. The Commission found that the other customers which make up the
remainder of FPT’s revenues are not significantly reliant on FPT for their front -of-port
requirements, and raised no concerns regarding the merger.
[22] Therefore, the Commission concluded that, while there are a limited number of
upstream players for the provision of front-of-port services in the port of Port Elizabeth,
anti-competitive input foreclosure is unlikely.
Customer foreclosure
[23] As regards customer foreclosure, the Commission considered whether Tradekor would,
as a result of the merger, cease procuring front-of-port services from customers of FPT,
and whether this would have an anti-competitive effect in the upstream market.
[24] The Commission found that there are numerous customers other than Tradekor
requiring front-of-port services in the port of Port Elizabeth. Given the availability of
alternative customers, the Commission concluded that Tradekor would be unlikely to
exercise market power in the procurement of front-of-port services.
[25] The merging parties also submitted that arrangement between FPT and Tradekor in
relation to the provision of front-of-port services was pre-existing, non-exclusive and ad
hoc in nature, and that it would not change post -merger. Accordingly, none of FPT’s
upstream rivals would be deprived of Tradekor as a downstream customer as a result
of the merger.
[26] Regarding incentives, the Commission found that Tradekor’s procurement from FPT
constituted just under [%] of its total spend on front -of-port services , with the
remaining portion of its spend allocated to FPT’s upstream competitor, Transnet Port
remaining portion of its spend allocated to FPT’s upstream competitor, Transnet Port
Terminals PE. The Commission also found that Tradekor accounts for only about
[%] of Transnet Port Terminals PE’s business in the provision of front -of-port services
in the port of Port Elizabeth.
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[27] This suggests that other front-of-port service providers in the upstream market are not
reliant on Tradekor as a customer and that, even if the merged entity were to attempt
to foreclose such providers, there are various other customers available in the
downstream market.
[28] Based on the above, the Commission concluded that the proposed transaction is
unlikely to raise customer foreclosure concerns in relation to the provision of front -of-
port services.
Vertical overlap in relation to back-of-port services
[29] The second potential vertical overlap assessed by the Commission arises from the fact
that Tradekor renders back-of-port handling services to FPT in the port of Port
Elizabeth. These services include the warehousing and handling of cargo as well as
transport services . According to the merging parties , Tradek or provides FPT with
materials handling equipment so that it can perform front-of-port services in respect of
certain bulk commodities such as manganese and soya bean meal in the port of Port
Elizabeth. FPT procures these services from Tradekor because it d oes not have its
own capability at the port.
[30] For purposes of this overlap, the Commission considered the upstream market for the
provision of material handling services, and the downstream market for the procurement
of material handling services in the port of Port Elizabeth. Tradekor is active in the
upstream market, and FPT is active in the downstream market.
Input foreclosure
[31] As regards input foreclosure, the Comm ission found that Tradekor has no customers
other than FPT in the port of Port Elizabeth for the provision of back-of-port services.
[32] As such, the Commission concluded that there no customers are likely to be affected
by a potential input foreclosure strategy.
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[33] The Commission also found that there are various providers of back -of-port services
other than Tradekor in the port of Port Elizabeth.
Customer foreclosure
[34] As regards customer foreclosure in the downstream market for procurement of back-of-
port services, the Commission found that there are several customers other than FPT
in the port of Port Elizabeth who currently procure back -of-port services from other
upstream providers.
[35] Given the availability of alternative customers, the Commission found that FPT is
unlikely to exercise market power in the downstream market for the procurement of
handling services. The Commission also found that FPT is largely reliant on providers
other than Tradekor for the provision of handling services in the port of Port Elizabeth.
[36] None of the upstream suppliers of back -of-port services in the port of Port Elizabeth
raised any concerns regarding the proposed merger.
[37] The merging parties al so submitted that arrangement between FPT and Tradekor in
relation to the provision of back-of-port services was pre-existing, non-exclusive and ad
hoc in nature, and that it would not change post -merger. Accordingly, none of
Tradekor’s upstream rivals wo uld be deprived of FPT as a downstream custome r of
back-of-port services as a result of the merger.
[38] The Commission concluded that the proposed transaction is unlikely to raise customer
foreclosure concerns in relation to the provision of back-of-port services.
Third party concern
[39] The Commission received a concern that certain back-of-port operators (not including
Tradekor) were not compliant with the Nelson Mandela Bay Municipality ( “NMBM”)
health regulations, and that a possible court interdict to prevent these operators from
operating would give the merged entity an advantage over other terminal operators in
the break bulk sector, which may result in reduced tariffs.
the break bulk sector, which may result in reduced tariffs.
[40] The Commission did not view this concer n as merger -specific, and found that any
reduction of tariffs a s a result of the merger would unlikely be an anti-competitive
outcome.
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[41] Based on the evidence in the record, the Tribunal agrees with the Commission’s view
in this regard, and with the Commission’s conclusion that the proposed transaction is
unlikely to substantially prevent or lessen competition in any of the relevant markets
concerned.
Public interest
Employment
[42] The merging parties submitted that the proposed transaction will not have any impact
on employment. In particular, there will be no retrenchments or job losses as a result
of this transaction.
[43] The Commission contacted representatives of the TLG Group and Tradekor , who
confirmed that no concerns were raised by their respective employees.2
[44] The merging parties have also provided an unequivocal statement that no job losses
will arise as a result of the proposed transaction.
Spread of ownership
[45] The Commission found that TLG Investments has an indirect historically disadvantaged
person (“HDP”) shareholding of 26% (by virtue of Mokobela’s 26% shareholding in TLG
Acquisition Holdings).
[46] On the other hand, Tradekor, pre-merger, effectively has an indirect HDP shareholding
of 26% made up of 13% from Mokobela3; and the remaining 13% from City Deep Trade
Port4.
[47] The Commission concluded that , as a result of the merger, the effective 13% HDP
shareholding of City Deep Trade Port in Tradekor will be replaced by an increased
effective HDP shareholding of 13% by Mokobela, allowing for the effective HDP
shareholding in Tradekor to remain at 26%.
[48] No further public interest concerns were raised.
2 See email dated 18 January 2023 from TLG (Merger Record, p335) and email dated 24 January 2023 from
Tradekor (Merger Record, p338).
3 As mentioned above, Mokobela holds a HDP shareholding of 26% in TLG Acquisition Holdings, and TLG
Acquisition Holdings in turn holds an indirect 50% shareholding in Tradekor pre-merger, which will increase to
99% post-merger.
4 [Percentage of a shareholder’s stake] of the shares in Etymo and Etymo in
99% post-merger.
4 [Percentage of a shareholder’s stake] of the shares in Etymo and Etymo in
turn holds a 50% shareholding in Tradekor.
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Conclusion
[49] In the light of the above, we agree with the Commission’s conclusion that the proposed
transaction is unlikely to substantially prevent or lessen competition in any relevant
market or to raise any substantial public interest concerns. Accordingly, we approve
the proposed transaction unconditionally.
27 March 2023
Jerome Wilson SC Date
Concurring: Prof Liberty Mncube and Prof Fiona Tregenna
Tribunal case manager: Leila Raffee
For the merging parties: Derushka Chetty, Wade Graaff, and Sphiwe Dlamini
of ENSafrica
For the Commission: Reabetswe Molotsi and Grashum Mutizwa