COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM092SEP23
Hatfield Holdings (Pty) Ltd Primary Acquiring Firms
Hatfield Property Holdings (Pty) Ltd
And
The Business of the Audi Centre, Somerset West Dealership
and the Property on which Audi Centre operates. Primary Target Firms
Introduction
Panel : A Wessels (Presiding Member)
: T Vilakazi (Tribunal Member)
: G Budlender (Tribunal Member)
Heard on : 09 November 2023
Order issued on : 09 November 2023
Reasons issued on : 27 November 2023
REASONS FOR DECISION
[1] On 09 November 2023, the Competition Tribunal (“Tribunal”) unconditionally
approved a large merger wherein Hatfield Holdings (Pty) Ltd (“Hatfield
Holdings”) intends to acquire control of the business of the Audi Centre,
Somerset West Dealership (“Target De alership”). As part of the proposed
merger, Hatfield Property Holdings (Pty) Ltd (“Hatfield Property”) will also
acquire the property on which the Target Dealership operates from (“Target
Property”).
[2] On completion of the proposed transaction, Hatfield Holdings will own and
control the Target Dealership whereas Hatfield Property will own and control
the Target Property.
The parties and their activities
Primary acquiring firms
[3] The primary acquiring firms are Hatfield Holdings and Hatfield Property.
Hatfield Holdings and Hatfield Property are private companies incorporated in
accordance with the laws of the Republic of South Africa.
[4] Hatfield Holdings and Hatfield Property are jointly controlled by the Brad Kaftel
Family Trust (“Trust”) 1 and Grapevine Property Investments 103 CC
(“Grapevine”).2 Grapevine’s members
qualify as historically disadvantaged
persons (“HDPs”) in terms of the Competition Act.3
[5] Hatfield Holding and Hatfield Property and the firms controlled by them are
collectively referred to below as the “Acquiring Group”.
[6] The Acquiring Group owns and operates 35 branded motor dealerships in
Gauteng and KwaZulu -Natal Provinces. The dealerships primarily sell
passenger vehicles (“PAS”) and light and medium commercial vehicles (“LCV
and MCV”). The only dealership selling heavy commercial vehicles (“HCV”) is
MAN and VW Trucks and Bus.
1 As to %.
2 As to %.
3 Act No 89 of 1998, as amended.
[7] The Acquiring Group also sells: used vehicles, after -sales services and after -
sales branded original equipment manufacturer (“OEM”) parts and accessories,
accessories (such as tow bars, tracking devices and safety film), and top up
maintenance plans, and finance and insurance support services.
[8] The Acquiring Group sells the following brands: Audi, VW, Ford, GWM Haval,
Omoda, Honda, Isuzu, Mahindra, Mazda, Renault, Suzuki, Triumph, and MAN
Truck & Bus.
Primary target firms
[9] The primary target firms are:
a. The Audi Dealership Business. The Audi Dealership Business is a
private company incorporated in accordance with the laws of the
Republic of South Africa, operating out of the corner of R44 and R104
Highway, Somerset West, Western Cape Province. The Target
Dealership is wholly controlled by Somerset West RS (Pty) Ltd (“SW”);
b. The property on which the Target Dealership operates. The Target
Property is wholly controlled by Dirk Ellis Motor Group (Pty) Ltd
(“DEMG”);
c. Both SW and DEMG are controlled by the Dirk Ellis Trust. 4 The
controlling trustee for Dirk Ellis Trust is Dirk Johannes Scholtz Ellis.
[10] The Target Dealership is an Audi motor vehicle dealership, repair centre and
service centre which sells, repairs, and maintains Audi branded motor vehicles.
[11] The Target Dealership sells new and used passenger vehicles. It does not sell
LCVs and MCVs or HCVs.
4 SW is controlled by The Dirk Ellis Trust as to shareholding. The remaining shareholding in
SW is held by an HDP in terms of the Competition
Act. The merging parties indicate that does not have any form of
control in SW.
[12] The Target Property is the premises from which the Target Dealership
operates.
Transaction
[13] In terms of the proposed transaction, Hatfield Holdings will acquire (100%)
control of the Target Dealership from SW. As part of the proposed merger,
Hatfield Property will also acquire the Target Property from DEMG. Upon the
implementation of the proposed transaction, Hatfield Holdings will wholly own
and control the Target Dealership whereas Hatfield Property will wholly own
and control the Target Property.
Indivisibility of the Transaction
[14] In determining whether the transaction constitutes a single indivisible
transaction, the Competition Commission (“Commission”) took into
consideration that the Target Dealership and Target Property are being bought
from similar shareholders. The Commission further noted that the economic
rationale made sense as a building is required to operate a dealership. In
addition, the Commission noted that the merger parties signed the transaction
agreements for the Target Dealership and the Target Property at the same time
demonstrating the parties’ intention to implement the transactions at the s ame
time. In addition, the Commission’s investigation found that the primary
acquiring firms are jointly controlled by the same shareholders, the BKF Trust
and Grapevine.
[15] Based on the above, the proposed transaction constitutes a single indivisible
transaction.
Rationale
[16]
[17]
.
Competition Assessment
[18] We considered the activities of the merger parties and found that the proposed
transaction gives rise to a horizontal overlap. The horizontal overlap occurs in
that the merger parties are both active in the provision of new and used
passenger vehicles, after-sales vehicle servicing, sale of OEM branded parts,
and the ancillary maintenance plans and warranties.
[19] The transaction does not raise any competition concerns in any narrow
geographic market (defined in previous matters as provincial and/or with
reference to an appropriate radius from the target dealership). 5 In this matter,
we found that the proposed transaction does not present a geographic overlap
as the acquiring firms do not own or operate any dealerships in the Western
Cape Province.
[20] Furthermore, we considered the dynamics of the sale of new passenger
vehicles in a national market. In this regard, the merger parties submitted that
they will have a very small combined estimated market share in the
national market for the sale of new passenger vehicles, with a negligible market
share accretion . At brand level (i.e. Audi), the merged entity will have
a combined estimated national market share with a small accretion
for Audi Branded Motor vehicles.
5 Case No.: LM064Aug21; LM150Feb20; LM188Mar22.
[21] There is no vertical relationship between the merger parties in South Africa
because the merger parties do not supply any products or services to each
other and also do not operate at different parts of the same value chain.
[22] Based on the above, the proposed merger is unlikely to result in a substantial
prevention and/or lessening of competition in any market.
Public Interest
Effect on employment
[23] The merging parties submitted that the proposed transaction will not have any
negative effects on employment.
[24] The Commission contacted the employee representatives of the merger
parties, who confirmed that its employees had no concerns regarding the
proposed merger.
[25] In light of the above, the proposed merger is unlikely to raise employment
concerns.
Effect on the spread of ownership
[26] The Commission found that the acquiring firms currently have an effective
shareholding by HDPs The Commission further found
that the Target Dealership has shareholding held by HDPs. Thus, the
proposed transaction will result in a dilution in HDP ownership.
[27] The merger parties submitted that the Acquiring firms’ HDP shareholder,
Grapevine, has a controlling shareholding and Grapevine has been an integral
part of the Acquiring Group's business for 20 years, with a key role in strategic
decisions. Thus, the Targ et Dealership will become controlled by an HDP
shareholder post -transaction, whereas the HDP shareholder in the Target
Dealership or SW does not have control rights. As such, the merger results in
a promotion of ownership from non-control to control by HDPs.
[28] The Commission also sought to understand the Acquiring Group’s strategy in
terms of HDP ownership at dealership level.
.
[
29] Given that the Target Dealership is an Audi dealership, the Commission sought
to find out if Audi requires any form of HDP shareholding to obtain a franchise.
eff ectively holds shareholding in each of the 35 dealerships
owned by the Acquiring Group. The proposed transaction will add a dealership
to the Acquiring Group’s portfolio . Pre-merger, the Target Property does not
have HDP ownership and the Commission noted that the proposed merger will
increase the HDP ownership in the Target Property by
[30] Accordingly, the Commission concluded that the proposed transaction does not
raise substantial public interest concerns.
[31] Based on the facts above, the proposed merger is unlikely to have a negative
impact on employment or the promotion of a greater spread of ownership.
Conclusion
[32] For the reasons set out above, we are satisfied that the proposed transaction
is unlikely to substantially prevent or lessen competition in any relevant market.
Furthermore, the proposed merger does not raise any public interest concerns.
[33] We therefore approve the proposed transaction without imposing conditions.
27 November 2023
Prof T. Vilakazi Date
Adv G. Budlender SC and Mr. A Wessels concurring
Tribunal Case Manager: Nomkhosi Mthethwa-Motsa
For the Merging Parties: Lara Granville and Taigrine Jones of Cliffe Dekker
Hofmeyr Inc
For the Commission: Billy Mabatamela and Themba Mahlangu
Signed by:Prof T Vilakazi
Signed at:2023-11-27 16:22:21 +02:00
Reason:Witnessing Prof T Vilakazi