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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM148Nov22
In the large merger between:
Epiroc Holdings SA Primary Acquiring Firm
And
K2022596519 (South Africa) (Pty) Ltd and Polkadots
Properties 117 (Pty) Ltd
Primary Target Firms
Panel: M Mazwai (Presiding Member)
A Wessels (Tribunal Panel Member)
J Wilson (Tribunal Panel Member)
Heard on: 15 February 2023
Date of last submission: 24 February 2023
Order issued on: 10 March 2023
Reasons Issued on: 14 April 2023
REASONS FOR DECISION
Introduction
[1] On 10 March 2023, the Competition Tribunal (“the Tribunal”) conditionally approved the
large merger whereby Epiroc Holdings South Africa (Pty) Ltd (“Epiroc Holdings”) intends
to acquire the entire issued share capital of K2022596519 (South Africa) (Pty) Ltd (“New
Aard”) and Polkadots Properties 117 (Pty) Ltd (“Polkadots”).
[2] Prior to the impl ementation of the proposed transaction, there will be an internal
restructuring process, in terms of which the business currently carried on by Aard Mining
Equipment (Pty) Ltd (“Aard”) will be sold and transferred, as a going concern, to New
Aard.
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Parties
Primary acquiring firm
[3] The primary acquiring firm is Epiroc Holdings, a private company registered in
accordance with the laws of the Republic of South Africa.
[4] Epiroc Holdings is wholly owned by Epiroc Rock Drills AB Sweden (TMGL) (“Epiroc
Rock Drills”). Epiroc Rock Drill s is, in turn, wholly owned by Epiroc AB Sweden (ACE)
(“Epiroc AB”). Epiroc AB is a public company listed on the Nasdaq Stockholm Stock
Exchange.
[5] In South Africa, Epiroc Holdings directly controls, among other firms, Epiroc South Africa
(Pty) Ltd (“Epiroc SA”).
[6] Epiroc AB and all the firms it controls are referred to below as the “Acquiring Group”.
[7] The Acquiring Group is a supplier of rock excavation equipment and mining machinery,
and provides solutions that increase utilisation and productivity in the minin g, natural
resources and infrastructure industries. The Acquiring Group develops and produces
equipment, consumables and services for use in surface and underground mining,
infrastructure, civil works, well-drilling and geotechnical applications.
[8] In South Africa, the Acquiring Group (through Epiroc Holdings and Epiroc SA) is active
in the development, manufacturing, marketing and distribution of equipment for use in
mining and other applications. Of relevance for purposes of this transaction, the
Acquiring Group currently supplies, amongst others, the following mining equipment: (i)
drill rigs intended for both low seam and standard mass mining applications; (ii) bolting
rigs intended for standard mass mining applications; and (iii) load, haul and dump (LHD)
loaders for standard mass (10 -ton) mining applications. The Acquiring Group also
provides maintenance and support services in respect of the equipment they supply to
customers.
Primary target firms
[9] The primary target firms are New Aard and Polkadots (the “Target Group” or the “Target
Firms”).
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[10] New Aard is a newly incorporated company and is wholly owned by AME Investment
Holdings (Pty) Ltd (“AME Investment Holdings”).
[11] New Aard is solely intended to acquire Aard which currently supplies, amongst others,
the following mining equipment : (i) LHD loaders intended for low seam (profile) and
mass (10-ton) mining applications; (ii) drill rigs intended for low seam (profile) mining
applications; and (iii) bolting rigs. Aard also provides maintenance and support services
in respect of the equipment it supplies to its customers.
[12] Polkadots is a company incorporated in accordance with the laws of the Republic of
South Africa and is also wholly owned by AME Investment Holdings. Polkadots does not
control any firms and owns immovable property for the purposes of providing business
premises to Aard.
The proposed transaction
[13] The proposed transaction is comprised of two legs:
13.1. In the first leg , Aard will sell its business as a going concern to New Aard,
and the leases between Polkadots and Aard will be transferred to New Aard.
13.2. In the second leg, Epiroc Holdings will purchase the entire issued share
capital in New Aard and Polkadots. The net result will be that Epiroc Holdings
will acquire sole control over the business carried on by Aard pre-merger.
[14] The Competition Commission (“Commission”) took the view that these two legs should
be considered as part of a single indivisible transaction given, inter alia, that both of the
Target Firms are under the common control of AME Investment Holdings; both legs of
the transaction will occur simultaneously; and Polkadots owns the immovable property
from which New Aard operates.
[15] The Tribunal, in line with its prior decisions,1 agrees with this approach.
1 Crown Gold Recoveries (Pty) Ltd, the Industrial Development Corporation of SA Ltd and Khumo Bathong
Holdings (Pty) Ltd, Case No. LM012May02 at pp 2-3; Peermont Holdings (Pty) Ltd and LCI (Overseas)
Investments (Pty) Ltd, Case No. LM059Jun19 at paras 7-9.
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Rationale for the proposed transaction
[16] Epiroc Holdings submitted that t he Acquiring Group has a presence in a number of
underground mining segments, but not in low seam mining , due to a lack of low profile
and utility vehicles in its product portfolio. The proposed transaction will fill this gap
because Aard provides loaders, drill rigs, and utility vehicles that are used in low seam
mining operations.
[17] Epiroc Holdings submitted further that, by combining two businesses with
complementary product portfolios, the Acquiring Group will be in a position to increase
its presence and market share in Africa. In addition, the Acquiring Group believes there
is an opportunity to grow Aard’s aftermarket sales through the footprint and service
coverage of the Acquiring Group. The acquisition of the Target Group will also result in
an additional production site in South Africa for the Acquiring Group, which it believes
will increase the production flexibility of its underground division.
[18] AME Investment Holdings submitted that the transaction will enable it to realise value
arising from the growth of the Target Group over the last 30 years. From the perspective
of the Target Group, the Acquiring Group is viewed as being a capable group of firms
with significant experience and expertise in the mining sector generally. The Target
Group believes that the expansion of its product offering through the inclusion of the
Acquiring Group's products will enable the Target Group to further grow its business
through access, inter alia, to additional efficiency enhancing resources and economies
of scale.
[19] The Commission confirmed that the Acquiring Group’s internal documents were
consistent with its expressed rationale for the proposed transaction.
Competition assessment
[20] The Commission found that proposed transaction raises a horizontal overlap insofar as
the merg er parties’ activities relate to (i) the supply of drill rigs for low seam mining
the merg er parties’ activities relate to (i) the supply of drill rigs for low seam mining
applications; (ii) the supply of 10-ton LHDs for standard mass mining applications; and
(iii) the provision of maintenance and support services for mining equipment.
[21] As regards the last-mentioned overlap, the Commission found that the merger parties’
services are not substitutable from a demand-side perspective, because customers that
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have purchased mining equipment from the Epiroc group are unlikely to be able to
service their Epiroc -branded equipment at Aard , and vice versa . As such, the
Commission concluded that the merg er parties are unlikely to constrain each other in
terms of these services, and therefore did not conduct any further assessment in relation
to this overlap.
The relevant product markets
The supply of drill rigs for low seam mining applications
[22] In defining the relevant product market for the supply of drill rigs for low seam mining
applications, the Commission considered whether these are substitutable with standard
mass mining drill rigs from a price perspective. In this regard, the Commission found
that the price differential between low seam and standard mass mining drill rigs ranges
from 30% to 155% . On this basis, the Commission concluded that low seam and
standard mass mining drill rigs are unlikely to be substitutable from a price perspective.
[23] The Commission found that this conclusion was supported by evidence from customers
that they would not switch to standard mass mining drill rigs if the price of low seam
mining drill rigs were to increase by 5 to 10%. This is bec ause their ore body dictates
that they can only use low seam drill rigs.
[24] As such, the Commission, without being conclusive, decided to consider the competitive
effects of the proposed merger on the relevant product market for the supply of drill rigs
supply for low seam mining applications.
The supply of LHDs for standard mass mining applications
[25] In defining the relevant product market for the supply of LHDs for standard mass mining
applications, the Commission considered whether these are substitutable with low seam
LHDs from a price, characteristics and intended purpose perspective.
[26] In terms of price, the Commission found that there is a wide price differential between
low seam and standard mass LHDs. On this basis, the Commission concluded that low
low seam and standard mass LHDs. On this basis, the Commission concluded that low
seam and standard mass mining LHDs are unlikely to be substitutable from a price
perspective.
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[27] The Commission also considered the extent to which low seam LHDs and LHDs used
for standard mass mining applications are substitutable by reason of characteristics and
intended purpose. In this regard, the Commission found that LHDs for standard mass
mining applications cannot be used in low seam mining operations because they are too
big and are designed for mass mining operations. Conversely, the Commission found
that low seam LHDs are not likely substitutes for standard mass mining LHDs because
(i) the former are designed for low profile navigation , which provides limited visibility in
standard mass mining applications; and (ii) low seam LHDs attract higher operating
costs per ton than standard mass mining LHDs.
[28] Therefore, again without being conclusive, the Commission decided to assess the
competitive effects of the proposed transaction in the relevant product market for the
supply of LHDs for mass mining applications.
The relevant geographic markets
[29] The Commission noted that, i n the Komatsu America Corp. v Joy Global Inc. 2 case, it
had considered the relevant geographic market for the supply of mining equipment to
be national in scope.
[30] The Commission decided not to deviate from that approach in this case given that both
the Acquiring Group and the Target Group supply their respective l ow seam drill rigs
and mass mining LHDs (which form part of the broader market segment for mining
equipment) throughout South Africa.
Market share analysis and countervailing buyer power
The relevant market for the national supply of drill rigs for low seam mining applications
[31] The merger parties estimated their combined market share in the relevant market for
the national supply of drill rigs for low seam mining applications, to be approximately 9%
(i.e. 1% for the Acquiring Group and 8% for the Target Group), with the remainder of the
market share being held by GHH Mining Machines (Pty) Ltd (“GHH”) and Sandvik.
market share being held by GHH Mining Machines (Pty) Ltd (“GHH”) and Sandvik.
However, this estimate was not based on any empirical evidence such as calculated
revenues or volumes.
2 Komatsu America Corp v Joy Global Inc (2017), Case no. LM174Nov16.
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[32] The Commission was also unable to obtain any readily available revenue or sales data
from competitors to calculate the market size of the relevant market for the national
supply of drill rigs for low seam mining applications. However, the Commission obtained
market share estimates from GHH (a competitor of the merger parties), which indicated
that the merged entity is likely to have a combined market share of approximately 13%
in the relevant market , with Sandvik being the biggest player with a market share of
approximately .
[33] The Commission also considered the extent to which countervailing power is present in
the market and is likely to prevail post -merger. In this regard, the Commission
considered (i) the ability of customers to negotiate prices; (ii) the ability of customers to
negotiate favourable terms and conditions of contracts; and (iii) the ability of customers
to switch across different suppliers.
[34] As regards the first factor, the Commission found that customers can negotiate the
prices at which they purchase low seam mining drill rigs in South Africa. This was
confirmed by three third parties, namely GHH as well as Eland Platinum and Sibanye
Stillwater (customers of the Target Group).
[35] In order to determine whether customers can negotiate better terms with suppliers of
mining equipment (including drill rigs for low seam mining applications), the Commission
relied on the internal documents of the merger parties. In this regard, the Commission
found that the Target Group’s agreements with most customers contained terms and
conditions that were more favourable to the customers than to the Target Group. These
included narrow limitation of liability clauses, favourable termination rights , extensive
warranties and penalties for delays in performance.
[36] The Commission also found that customers are able to switch between different
suppliers of low seam mining drill rigs, and that this will not be materially affected by the
suppliers of low seam mining drill rigs, and that this will not be materially affected by the
merger. This was confirmed by evidence from the merger parties and from existing
customers such as Eland Platinum and Sibanye Stillwater.
[37] The Commission concluded that the proposed transaction is unlikely to confer market
power on the merged entity (owing to its low estimated combined market share and the
existence of countervailing buyer power), and is accordingly unlikely to result in the
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substantial lessening or prevention of competition, in the relevant market for the national
supply of drill rigs for low seam mining applications.
The relevant market for the national supply of 10 -ton LHDs for standar d mass mining
applications
[38] The merger parties estimated their combined market share in the relevant market for
the national supply of 10 -ton LHDs for standard mass mining applications, to be
approximately 17% (i.e. 15% for the Acquiring Group and 2% for the Target Group), with
the remaining market share being held by GHH, Sandvik, Rham and Caterpillar. Again,
however, these estimates were not based on any empirical evidence such as calculated
revenues or volumes.
[39] The Commission was also unable to calculate the market size of the market due to a
lack of readil y available revenue or sales data from competitors. The Commission
therefore again utilized market share estimates provided by GHH (a competitor of the
merger parties). GHH’s estimat es indicate that the merged entity is likely to have a
combined market share of approximately 18%, with the biggest player in this relevant
market also being Sandvik (with a market share of approximately ).
[40] The Commission also considered the extent to which countervailing buyer power is
prevalent in this market.
[41] The merger parties submitted that there is significant countervailing power in the market,
which will not be affected by the merger, because the choice of both low seam and mass
mining machinery is vast. The merger parties also provided evidence of three instances
where the Target Group had lost customers to other suppliers of LHDs for mass mining
applications.
[42] The Commission found that customers can negotiate the prices at which they purchase
low seam 10-ton LHDs for standard mass mining applications, and this was confirmed
by GHH and Barloworld Equipment/CAT (both competitors to the merger parties) as well
as Sibanye Stillwater (a customer of the Target Group).
as Sibanye Stillwater (a customer of the Target Group).
[43] The Commission also found that customers are able to negotiate favourable terms and
conditions of contracts , with the internal strategic documents of the Target Group
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indicating that their agreements with most customers contained terms and condition s
that were favourable to such customers.
[44] In addition the Commission found that customers for 10 -ton LHDs are able to switch
across suppliers. I n addition to the merger pa rties’ evidence of customer switching
referred to above, this was confirmed by existing customers such as Sibanye Stillwater.
[45] The Commission concluded that the proposed transaction is unlikely to confer market
power on the merged entity (owing to its low estimated combined market share and the
existence of countervailing buyer power), and is accordingly unlikely to result in the
substantial lessening or prevention of competition, in the relevant market for the national
supply of 10-ton LHDs for standard mass mining applications.
[46] Given the merger parties’ relatively low combined market shares and the ability of
customers to switch to other suppliers, the Tribunal agrees that the proposed merger is
unlikely to give rise to significant anti -competitive effects either in the relevant market
for the supply of drill rigs for low seam mining applications, or in the relevant market for
the supply of 10-ton LHDs for standard mass mining applications.
Public interest
Employment
[47] The merger parties unequivocally stated that the proposed transaction will not result in
any job losses or retrenchments of employees of either of the merger parties.
[48] The employees of the Acquiring Group are not represented by any trade union s.
However, the employee representative of the Acquiring Group confirmed that its
employees were notified about the proposed transaction and did not raise any
employment related concerns.
[49] The employees of the Target Firms are represented by two trade unions , namely
Solidarity and the National Union of Metalworkers South Africa (“NUMSA”). Solidarity
indicated to the Commission that it had not been notified about the proposed transaction.
indicated to the Commission that it had not been notified about the proposed transaction.
However, the Commission was satisfied by a proof of service from the merger parties
that Solidarity had been duly notified. NUMSA was also notified about the proposed
transaction and did not raise any employment-related (or other) concerns.
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[50] Based on the above, the Tribunal agrees with the Commission’s conclusion that the
proposed transaction is unlikely to raise any employment concerns.
Effect on the ability of SMMEs to enter into, participate in or expand in the markets
[51] The Commission also investigated the impact of the proposed merger on the ability of
small businesses to participate in or expand in the market . This followed a concern
raised by Fermel (Pty) Ltd, a competitor to the merger parties, that the size of the merged
entity, and the breadth of its combined offering (in particular, the combination of mining
machines and support equipment such as support carriers and shuttles), may prejudice
smaller players with smaller product portfolios.
[52] The Commission noted that the merged entity will generally only be able to engage in
an exclusionary conduct if it has sufficient market power in one or more of the rel evant
markets (i.e. low seam and/ or standard mass mining equipment in this case) post -
merger.
[53] Given the Commission’s finding that the merged entity is unlikely to have market power
post-merger in either of the relevant markets, it concluded that the proposed transaction
is unlikely to hinder and/ or lessen the ability of SMMEs to participate effectively in any
market. Customers in the relevant markets have the ability to purchase the different
kinds of equipment they require from different independent suppliers of mining
equipment (irrespective of the size of such suppliers), depending on their brand
preferences, and this will continue to be the case post-merger.
[54] We concur with the Commission’s conclusion in this regard.
Spread of ownership
[55] The merger parties submitted that the Target Group currently has a level 2 Broad-Based
Black Economic Empowerment (“B -BBEE”) status with 98.65% black ownership and
52.45% black women ownership, in terms of the applicable B-BBEE legislation; and that,
52.45% black women ownership, in terms of the applicable B-BBEE legislation; and that,
post-merger, both of the Target Firms will initially be 100% owned and controlled by
Epiroc Holdings, a foreign owned company that does not have any ownership by
historically disadvantaged persons (“HDPs”).
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[56] The merger parties submitted further, however, that the Acquiring Group is entrenched
in the South African market, and is committed to providing meaningful contributions
under, and compliance with, the applicable B-BBEE Codes and also the Mining Charter
(to which its customers are subject). The merger parties explained in this regard that
the Implementation Guide for the Mining Charter recognizes B -BBEE compliant
companies as having achieved a rating of Level 4 or better and being at least 25 % + 1
vote owned by HDPs.
[57] Having regard to this requirement, the merg er parties submitted that, post-merger, the
Acquiring Group will implement a suitable B -BBEE transaction in respect of New Aard
which will consider a variety of factors, including ownership, management control, skills
development, enterprise and supplier development and socio-economic development.
[58] As regards the ownership pillar, the merger parties submitted that the Acquiring Group
would implement a B -BBEE transaction to address ownership by HDPs in New Aard
(the “B-BBEE Restructure”) – which they intend to complete within 12 months (and no
more than 24 months in the event of unforeseen delays) of the implementation of the
proposed merger.
[59] The B -BBEE Restructure initially contemplated by the Acquiring Group involved the
transfer of 100% of the shares acquired by Epiroc Holdings in New Aard to Epiroc SA,
which has 26% ownership by HDPs. However, pursuant to further engagements with
the Commission and the Department of Trade, Industry and Competition (“dtic”), the
Acquiring Group ultimately also agreed to establish an employee share ownership
programme (“ESOP”) that wou ld hold 5% of the shares in New Aard for qualifying
employees, approximately 70% of which would be HDPs. The merger parties submitted
that they intend to implement the ESOP within 18 months after the implementation of
the proposed merger.
[60] The net effect of the B-BBEE Restructure and the ESOP will therefore be that:
[60] The net effect of the B-BBEE Restructure and the ESOP will therefore be that:
60.1. Epiroc SA will hold 95% of the issued share capital in New Aard , as a result of
which HDPs will have an effective interest of 24.7% in New Aard by virtue of
holding 26% of the shares in Epiroc SA; and
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60.2. the remaining 5% of the issued share capital of New Aard will be held by an ESOP,
as a result of which there will be a further 3.5% HDP ownership in New Aard by
virtue of the fact that approximately 70% of the beneficiaries of the ESOP will be
black people.
[61] In sum, therefore, the B-BBEE Restructure and the ESOP will give rise to a 28.2% HDP
ownership in New Aard.
[62] Based on the commitments made by the merger parties in respect of the B -BBEE
Restructure and the ESOP, t he Commission recommended the approval of the
proposed merger subject to conditions reflecting those commitments.
[63] At t he Tribunal hearing on 15 February 2023 , we queried whether the proposed
conditions were sufficient to justify the merger from a public interest address given the
very significant reduction it would bring about in the effective HDP ownership of New
Aard from 98.65% to 28.2%. We also queried various aspects of the design and timing
of the proposed ESOP, and whether the trade unions representing the Target Group
employees had been consulted on the terms of the draft ESOP condition (the response
was that they had not been).
[64] Arising from the responses given at the merger hearing, we requested the merger
parties to provide (i) details of the HDP shareholders/ beneficiaries in the direct and
indirect shareholding structure of the Target Firms; (ii) the number of employees (total
and HDP) of the Target Firms; (iii) details of the public interest benefits of the merger
that are cognisable in terms of section 12A(3) of the Competition Act; and (iv) details of
any additional public interest commitments the merger parties were prepared to include
in the proposed conditions. We also requested the Commission to obtain the views of
the relevant trade unions regarding the proposed ESOP condition.
[65] In their response dated 24 February 2023, the merger parties provided details of the
[65] In their response dated 24 February 2023, the merger parties provided details of the
HDP shareholders and beneficiaries in the shareholding structure of the Target Firms.
They also provided details of the number of employees of the Target Firm and confirmed
that approximately 70% of the employees that would qualif y to participate in the ESOP
were HDPs.
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[66] As regards the public interest benefits of proposed merger, the merger parties submitted
that the public interest analysis contemplated by section 12A(3) of the Act was a holistic
one, in which negative effects un der one or more subsections could be compensated
for by positive effects under others, and they proceeded to make submissions in respect
of each of the factors listed in section 12A(3).
[67] As regards section 12A(3)(a), the merger parties submitted that, a s a result of the
proposed transaction, the Acquiring Group will be able to expand the existing activities
of New Aard’s manufacturing facility to produce Epiroc products that are currently
manufactured outside South Africa. The merger parties submitted that this localisation
of manufacturing, coupled together with Epiroc's advanced technology and research
and development (“R&D”), will result in positive benefits flowing to the sector as a whole
as well as t o end-consumers. In particular, the increased local manufacturing of
products used in underground mining will likely result in increased employment
opportunities in South Africa , and also increased demand by the merged entity for
products and services from local suppliers (many of which are small, medium and micro
enterprises (“SMMEs”) and HDP firms). In addition, the Acquiring Group is a leading
supplier of Battery Electric Vehicles, and the merger will enable New Aard to obtain
access to this technology and the Acquiring Group's considerable R&D in order to make
safer and more efficient products to service local and foreign markets.
[68] As regards section 12A(3)( b), t he merger pa rties confirmed that there would be no
retrenchments as a result of the merger and, to provide certainty in this regard, agreed
to impose a moratorium on any merger-related retrenchments for a period of two years.
They also referred under this heading to the likely growth that New Aard will experience
They also referred under this heading to the likely growth that New Aard will experience
in its manufacturing volumes as a result of the merger, and the positive impact that this
is likely to have on employment both at New Aard and within its supply chain.
[69] As regards section 12A(3)(c), the merger parties submitted that, arising from the likely
growth and increased production that New Aard will experience as a result of the merger,
SMME and HDP firms that supply New Aard are likely to benefit from this growth and to
expand within their respective markets . I n addition, the Acquiring Group agreed to
increase New Aard’s supplier development and enterprise development spend post -
merger (as set out below).
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[70] As regards section 12A(3)(d), the merger parties subm itted that a key rationale for the
proposed merger from the Acquiring Group’s perspective i s to expand the sale of the
Target Group's products (in particular, its low profile and utility vehicles used in low seam
mining operations) into the numerous market s in which the Acquiring Group has a
presence internationally. The Acquiring Group submitted further (with reference to its
acquisition of New Concept Mining (Pty) Ltd in 2019), that it has a proven track record
of increasing the ability of South African businesses to compete internationally.
[71] As regards section 12A(3)(e), the merger parties acknowledged that the proposed
transaction will result in the reduction of ownership of HDPs in the Target Firms .
However, they submitted that the following countervailing factors should be taken into
account when assessing this factor:
71.1. the exiting HDP shareholders will receive considerable value for their interest in
the Target Firms, which will likely flow into the South African economy; and
71.2. the Acquiring Group has committed, through the B -BBEE Restructure and the
ESOP commitments, to an HDP ownership in New Aard of 28.2%, the broad-based
component of which (the ESOP) will be greater than that in New Aard currently.
[72] As regards the element of ownership by workers, the merger parties submitted that there
is currently no worker ownership in the Target Group, and that the ESOP will accordingly
introduce worker ownership and participation into the merged entity. The merger parties
submitted further that the participating employees will be able to appoint at least 50% of
the trustees in the ESOP and will not be required to pay anything to participate in the
ESOP.
[73] The merging parties also tendered additional commitments in order to enhance the
public interest benefits of the proposed merger, namely that:
73.1. New Aard will continue to implement its existing skills development initiatives
73.1. New Aard will continue to implement its existing skills development initiatives
and enterprise and supplier development initiatives post-merger;
73.2. an additional R10 million will be allocated towards skills development initiatives
in New Aard over a four-year period; and
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73.3. an additional R10 million will be allocated to various enterprise and supplier
development initiatives to the benefit of, inter alia, black firms, communities and
SMMEs over a four-year period.
[74] The Commission also contacted NUMSA and Solidarity for their comments on the
proposed ESOP condition. Only Solidarity responded to this request and raised various
questions that were answered by the merger parties. Solidarity did not express any
objections in relation to the proposed ESOP. We are of the view that the Commission
should obtain comments from the representatives of the relevant employees whenever
the establishment of an ESOP is sought to be included in proposed merger conditions.
[75] As regards the public interest analysis under section 12A(3) of the Act, the Tribunal has
previously explained that it is a holistic one, in terms of which the different public interest
grounds listed in section 12A(3) must be separately assessed, and then, if necessary,
weighed against each other in order to arrive at a net conclusion on the public interest
effects of the merger.3
[76] Whilst this previously expressed approach predates the amendments to section 12A
brought about by the Competition Amendment Act, 2018 , we do not believe that those
amendments impact upon the holistic approach to be followed in the assessment.
[77] Therefore, even if, on a consideration of all the evidence, a merger would have a
substantial negative effect insofar as section 12A(3)(e) is concerned, that effect might
be mitigated or outweighed by positive effects in relation to one or more of the other
factors listed in section 12A(3).
[78] In this case, therefore, the significant reduction in HDP ownership of New Aard that will
result from the proposed merger must be balanced against the establishment of an
ESOP to promote worker ownership as well as against the positive public interest effects
brought about by the merger (having regard to the enhanced conditions tendered by the
brought about by the merger (having regard to the enhanced conditions tendered by the
merging parties) in relation to the other factors listed in section 12A(3).
3 Distillers Corporation (SA) Limited and Stellenbosch Farmers Winery Group Ltd , Case no. 08LM/Feb02, at
paras 217-219; Harmony Gold Mining Company Ltd/ Gold Fields Ltd (Case no. 93/LM/Nov04) at para 54.
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[79] In this case, we have amended the proposed ESOP condition to provide that the
beneficiaries of the ESOP will only cease to participate for bad leaver events such as
resignations and dismissals, and that resignations or retirements in the ordinary course
of business and death will not affect participation in the ESOP.
[80] Holistically, and subject to the above amendment, we are satisfied with the public
interest commitments of the merger parties.
Conclusion
[81] We conclude that the proposed transaction is unlikely to substantially prevent or lessen
competition in any relevant market, and approve the proposed transaction subject to the
public interest conditions annexed hereto as “Annexure A”.
14 April 2023
Mr Jerome Wilson Date
Ms Mondo Mazwai and Mr Andreas Wessels concurring
Tribunal Case Manager: Juliana Munyembate
For the Merger Parties:
Advocate Nontokozo Mahlangu instructed by Kelly
Nevin, Sarah Charlton and Greg Shapiro of Eversheds
Sutherland; Judd Lurie and Ashleigh Hale of Bowmans;
and Albert Aukema, Reece May and Roelof Bonnet of
CDH.
For the Commission: Zukile Sokapase and Grashum Mutizwa