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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case no: LM091Sep23
In the large merger between:
Joint Venture Firm to be incorporated Primary Acquiring Firm
And
New H Powertrain Holding S.L.U
Primary Target Firm
Panel: L Mncube (Presiding Member)
I Valodia (Tribunal Member)
G Budlender (Tribunal Member)
Heard on: 23 November 2023
Order issued on: 24 November 2023
Reasons Issued on: 05 December 2023
REASONS FOR DECISION
Introduction
[1] On 24 November 2023, the Competition Tribunal (“the Tribunal”) unconditionally
approved the merger whereby Joint Venture Firm yet to be incorporated ("JV")
will acquire shares in New H Powertrain Holdings S.L.U ("Horse").
Primary acquiring firm
[2] The primary acquiring firm is a joint venture (“JV”) firm yet to be incorporated.
The JV will be jointly controlled by:
2.1. Renault S.A.S, a 100% affiliate of Renault S.A. (“Renault”), a public limited
company with shares listed on the Paris stock exchange incorporated in
accordance with the laws of France (50%); and
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2.2. Zhejiang Geely Holding Group Co., Ltd (“Geely”), a limited liability
company, incorporated in accordance with the laws of China (50%).
[3] Renault is not controlled by a single individual or firm. Renault’s five largest
shareholders are Government of France (15%), Nissan Motor Co., Ltd. (15%),
Capital Research & Management Co. (World Investors) (4.19%), Renault SA
Employee Stock Ownership Plan (3.61%) and t he Vanguard Group, Inc.
(1.73%).
[4] Geely is 91.07% owned by Mr. Li Shufu.
[5] The JV does not conduct any business activities. The JV will be established by
Geely and Renault for the purposes of this transaction.
[6] Relevant to the proposed transaction, globally, the Renault operates an internal
combustion engine (“ICE”) and hybrid powertrains business. Powertrains are
comprised of the engine, torque converter or flywheel, transmission, drive shaft
and the wheels of a vehicle. Renault’s powertrains business only derives
turnover from South Africa emanating from the export of a limited number of ICE
Renault powertrains to assembly plant in South Africa. Renault
supplies ICE powertrains to
. Renault does not have any subsidiaries or employees in
South Africa.
[7] Geely also manufacturers and supplies ICE and hybrid powertrains which
includes engines and transmissions worldwide. Geely’s powertrains business
(which will be contributed to the JV) does not operate in, nor, earn any turnover
from South Africa. Therefore , Geely Powertrain Business has neither
subsidiaries, nor employees in South Africa.
Primary target firm
[8] The primary target firm is New H Powertrain Holding S.L.U.2 (“Horse”), a holding
company, incorporated in accordance with the laws of Spain. Horse is wholly
owned and controlled by Renault S.A.S (the Acquiring Firm).
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[9] Horse will be incorporated for the purpose of the proposed transaction and has
no operations, assets, turnover, or employees in South Africa or elsewhere. It is
important to note that Renault will not contribute any Renault powertrains assets
located in South Africa to Horse given that, Renault does not manufacture any
powertrains is South Africa. Geely’s powertrains business (which will be
contributed to the JV) does not operate in, nor, earn any turnover from South
Africa.
Rationale
[10] The merging parties submitted that the proposed transaction is aimed at creating
a standalone global supplier of powertrain solutions, producing next generation
hybrid powertrains and highly energy-efficient ICE powertrains. The JV will focus
on developing carbon -free and low -emission technologies from five global
research and development centres (including three in Europe in Sweden, Spain
and Romania), and will operate 17 powertrain plants across three continents.
[11] In view of increasingly strict technical regulatory requirements across the globe,
the combination of Renault’s and Geely Holding’s assets is necessary to unlock
synergies necessary to continue investments in developing low -emission
powertrain technologies.
[12] The JV will offer a complete range of innovative low -emission solutions for ICE
and hybrid powertrains and will allow the Parties to increase their offering to
cover up to % of customers’ needs globally. The JV will also develop its
technological offerin g in the field of alternative and synthetic fuels, on a
standalone basis and also potentially through strategic cooperation with a
partner in the energy sector. As such, the JV will aim to achieve %
decarbonization, on the entire supply chain.
[13] The activities being contributed to the JV have strong product and geographic
complementarity. Indeed, the Geely Powertrain Business completes the Renault
Powertrain Business’ range, as it focuses on gasoline engines. In terms of
Powertrain Business’ range, as it focuses on gasoline engines. In terms of
geographies, the Renault Powertrain Business is mainly present in Europe and
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Latin America, while the Geely Powertrain Business is mainly present in Asia
(and China in particular) and in Sweden.
Overlaps
[14] The Commission considered the activities of the merging parties and found that
the proposed transaction result in a horizontal overlap in the powertrains
business of the merging parties. However, the parties are going into the joint
venture in the powertrain business outside of South Africa. The Renault
Powertrains Business which will be contributed to the JV has limited sales of
Internal Combustion Engine (“ICE”) Powertrain Solutions, engines and
transmissions to assembly plants in South Africa. The Geely Powertrain
Business does not operate in, nor, earn any turnover from South Africa.
[15] Therefore, the proposed transaction does not result in a geographic overlap as
regards the supply of powertrains.
Competition assessment
[16] Having considered the above , we do not consider it likely that the proposed
merger will result in a substantial prevention or lessening of competition in the
relevant market.
Public interest
Employment
[17] The merging parties submit ted that Renault, the JV, the Renault Powertrain
Business and the Geely Powertrain Business do not have any employees in
South Africa therefore, there will be no job losses arising from the proposed
transaction. The Commission is of the view that the proposed transaction is
unlikely to result in any job losses.
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The promotion of a greater spread of ownership
[18] The Commission found that the JV has no direct or indirect historically
disadvantaged persons (“ HDP”) ownership. Further, Horse also has no HDP
ownership. The Commission considered the impact of the proposed transaction,
whether it promoted a greater spread of ownership by HDPs and workers.
[19] The Commission noted the merging parties’ submissions that the proposed
merger involves the combination of overseas based distinct business units to
form a joint venture outside of South Africa. The merging parties therefore do
not have a physical presence in South Africa with respect to the activities which
will form part of the joint venture (i.e. powertrains). Although both parties are
active in South Africa through deriving turnover from exports to South Africa
(through Renault’s powertrains and vehicle exports and Geely’s vehicle exports)
none of these activities are conducted through any entities incorporated in South
Africa or by employees based in South Africa.
[20] Renault’s powertrains supplied to local manufacturing plant are also
manufactured offshore and exported in complete form.
[21] Consequently, the Commission concluded that an ownership remedy at either
merging party is practically impossible to implement in the circumstances
responsive to section 12A(3)(e) of the Act.
Conclusion on public interest
[22] For the above reasons, we find that the proposed transaction does not raise any
negative public interest concerns overall.
Conclusion
[23] We conclude that the proposed transaction is unlikely to substantially prevent or
lessen competition in any relevant market or to have a substantial negative public
interest effect.