COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM204Mar23
In the matter between:
K2023647843 (South Africa) (Pty) Ltd Acquiring Firm
and
Danny s Auto Body Parts (Pty) Ltd / Danny s Auto
Property Holdings (Pty) Ltd
Target Firm
Approval
[1] On 08 June 2023, the Competition Tribunal unconditionally
approved the large merger whereby K2023647843 (South Africa) Proprietary
Holdings Proprietary Limited
implementation
of the proposed merger, SPE BidCo will exercise sole control of the Target
Firms.
Panel : Jerome Wilson SC (Presiding Member)
: Prof. Fiona Tregenna (Tribunal Panel Member)
: Dr Thando Vilakazi (Tribunal Panel Member)
Heard on : 08 June 2023
Order issued on : 08 June 2023
Reasons issued on : 09 June 2023
REASONS FOR DECISION
compeliliontribunal
'""'"'"""
("Tribunal")
Limited ("SPE BidCo") will acquire Danny's Auto Body Parts Proprietary Limited
("Danny's Auto") and Danny's Auto Property
("Danny's Auto Property") (collectively "the Target Firms"). Upon
Parties to the transaction and their activities
Primary acquiring firm
[2] The primary acquiring firm is SPE BidCo, which is controlled by SPE Mid-Market
Fund 1 Partnership (the "SPE Fund") (represented by the general partner, SPE
Mid-Market Fund 1 General Partner Proprietary Limited ("SPE Fund General
Partner")). The SPE Fund General Partner is controlled by Sanlam Investment
Management Proprietary Limited ("Sanlam Investment Management").
[3] Sanlam Investment Management is controlled by Sanlam Investment Holdings
Proprietary Limited, which in turn is controlled by SIH Capital Holdings
Proprietary Limited ("SIH Capital Holdings"). SIH Capital Holdings is controlled
by Sanlam Limited (75%). The remaining 25% of the shares in SIH Capital
Holdings is held by ARC Financial Services Investments Proprietary Limited
("ARC").
[4] All the firms directly or indirectly controlled by Sanlam Limited are referred to as
the "Acquiring Group".
[5] SPE BidCo is a newly-established investment holding company which does not
currently conduct any business activities. The Acquiring Group is active in the
provision of financial services, including short- and long-term insurance,
employee benefits, private equity and investments. Furthermore, through the
SPE Fund, the Acquiring Group is active in pet care retail, meat production,
waste and environment management, and payment collection services.
Primary target firms
[6] The primary target firms are Danny's Auto and Danny's Auto Property.
[7] The Target Firms are ■ [%] owned and controlled by [shareholder names listed]
[shareholder names listed]
The balance of the shares in the Target Firms is held by various non-controlling
shareholders, including [shareholder names listed]
- · the current 1111 of Danny's Auto (111).
[8] Danny's Auto is a wholesaler of branded aftermarket automotive parts and
accessories for brands such as Dunlop, Lucas and FIAMM, and its in-house
brand Imoto Chemicals. Danny's Auto also distributes a portfolio of unbranded
brand Imoto Chemicals. Danny's Auto also distributes a portfolio of unbranded
products to wholesalers and retailers that want to rebrand and package their
own products.
[9] Danny's Auto Property is a property holding company and does not conduct any
business activities. Danny's Auto Property owns the property on which Danny's
Auto conducts its business.
Proposed transaction and rationale
Transaction
[1 0] In terms of the Sale Agreement, SPE BidCo will acquire 100% of the issued
shares in the Target Firms. Upon implementation of the proposed transaction,
SPE BidCo will exercise sole control of the Target Firms. Post-closing,
[shareholder names listed] - will acquire an indirect non-controlling ■
[%] interest in the Target Firms, through SPE BidCo.
Rationale
[11] The Acquiring Group submits that [Acquiring Group's rationale]
[12] From the sellers' perspective [Target Firm's rationale]
Competition assessment
[13] The Competition Commission ("the Commission") considered the activities of
the merging parties and found that there is no horizontal overlap between the
activities of the merging parties. In particular, the Commission found that none
of the firms within the Acquiring Group provide services or products that could
be considered as substitutable with those offered by the Target Firms.
[14] In particular, the Commission found that the Target Firms are active in the
aftermarket automotive industry supplying, inter alia, car hooters, brakes,
steering and timing kits; whereas the Acquiring Group is active in the financial
services industry and other industries such as pet care retail, meat production,
waste and environment management, and payment collection services.
[15] The Commission also found that the proposed transaction does not raise any
vertical overlaps as the merging parties do not supply each other with any
products or services.
[16] Clause 17 of the Sale Agreement entered between the Acquiring Group and the
sellers contains a restraint of trade in terms of which the Target Firm's
shareholders, excluding [shareholder name listed]-. are restricted from
directly or indirectly establishing a firm that will compete with the Target Firm for
a period of five years. The parties indicated that the purpose of the restraint is
to protect the investment made by SPE BidCo in the Target Firms.
[17] The Commission was of the view that the five-year duration of restraint was
unreasonable in the context of the proposed transaction and requested the
merging parties to reduce the duration to three years. The merging parties were
amenable to the Commission's request and submitted an addendum to the Sale
Agreement reflecting the reduced three-year duration of the restraint of trade.
[18] Based on the above, the Commission concluded that the proposed transaction
is unlikely to substantially prevent or lessen competition in any market.
[19] The Tribunal agrees with the Commission's conclusion in this regard.
Public interest
Effect on employment
[20] The Commission noted that the merging parties have provided an unequivocal
undertaking that the proposed transaction will not result in any retrenchments.
[21] SPE BidCo does not have any employees in South Africa. Accordingly, the
employees of the Acquiring Group are represented by an employee
representative, [employee representative listed]-· The employees of
Danny's Auto are represented by the Motor Industry Bargaining Council
("MIBCO") and the National Union of Metalworkers of South Africa ("NUMSA").
The Commission contacted the respective employee representative and trade
unions to obtain their views on the proposed transaction. [employee
unions to obtain their views on the proposed transaction. [employee
representative listed] - confirmed receipt of the non-confidential merger
filing and indicated that the employees of the Acquiring Group had not raised
any concerns regarding the proposed transaction. The Commission submitted
that they did not receive any response from either MIBCO or NUMSA despite
follow-up emails.
[22] Considering the above, the Commission concluded that the proposed merger is
unlikely to raise any significant employment concerns.
Effect on the spread of ownership
[23] The Commission found that the Target Firms currently have an HOP
shareholding of ■ [%] through [shareholder name listed] -
shareholdings in the companies, whilst SPE BidCo currently has an indirect HOP
shareholding of - [%] through the HOP shareholdings of Sanlam Limited
and ARC, respectively. In addition, [shareholder name listed] - will
continue to hold a ■ [%] interest in the Target Firms through SPE BidCo.
[24] Considering the above, the Commission concluded that the proposed
transaction promotes a greater spread of ownership of the Target Firms by
HOPs.
[25] The Commission also found that the proposed transaction does not raise any
other public interest concerns.
[26] The Tribunal agrees with the Commission's conclusion in this regard.
Conclusion
[27] For the reasons set out above, the Tribunal approves the proposed transaction
unconditionally.
Signed by:Jerome \Nlson
Signed at:2023-07•2 7 12:03:01 +02:00
Reason:V\11:ne.s.slng Jerome WAson
-Jerome Wilson SC
09 June 2023
Date
Concurring: Prof. Fiona Tregenna and Dr Thando Vilakazi
Tribunal case manager
For the merging parties
For the Commission
Baneng Naape
Richardt van Rensburg and Tayla Theron of
Edward Nathan Sonnenbergs Attorneys
Nonhlanhla Msiza and Themba Mahlangu