African Revival Investments Holdings (Pty) Ltd v Siyahamba Engineering (Pty) Ltd (128/LM/Dec08) [2009] ZACT 32 (13 May 2009)
- Citation
- [2009] ZACT 32
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, U Bhoola, N Manoim
- Case number
- 128/LM/Dec08
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, U Bhoola, N Manoim
- Case number
- 128/LM/Dec08
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed transaction, which increases African Revival Investments Holdings' shareholding in Siyahamba Engineering from 36% to 53%, does not result in any product overlap or confer control over related entities through cross-shareholding. The Commission's investigation confirmed that neither ARH's nor Investec's minority interests in Mitsui and Venus confer control, and there are no overlaps in activities between Siyahamba and DCD Dorbyl that would raise competition concerns. The Tribunal agreed with the Commission's conclusion that the transaction is unlikely to substantially prevent or lessen competition. Furthermore, there are no public interest issues arising from the merger. Accordingly, the transaction was unconditionally approved.
Court disposition
Merger unconditionally approved.
Orders
- The merger between African Revival Investments Holdings (Pty) Ltd and Siyahamba Engineering (Pty) Ltd is unconditionally approved.
- No conditions are imposed on the parties.
02
Material facts
Parties
African Revival Investments Holdings (Pty) Ltd
Applicant Counsel: Edward Nathan SonnenbergsSiyahamba Engineering (Pty) Ltd
RespondentAmounts and remedies
- ARIH Post Merger Shareholding in Siyahamba (%): 53
- ARIH Pre Merger Shareholding in Siyahamba (%): 36
- Shareholding Acquired From Mendo Holdings (%): 17
03
Procedural history
Posture
Merger Clearance / Decision on Unconditional Approval
04
Questions and positions
Legal issues
- 01
Does the proposed transaction result in a substantial prevention or lessening of competition in the relevant market?
- 02
Are there any public interest concerns arising from the merger?
- 03
Does cross-shareholding among related entities confer control that would affect competition analysis?
Party arguments
- Applicant
- The applicant argued that the transaction represents an investment in a financially sound business with a favourable outlook. The acquisition of a further 17% shareholding in Siyahamba would result in majority control, but there is no product overlap between the parties. The applicant asserted that there are no competition or public interest concerns, and the transaction should be approved unconditionally.
- Respondent
- The respondent, Siyahamba Engineering, did not oppose the transaction. The seller, Mendo Holdings, sought to divest part of its shareholding to realise its investment and access capital. The Competition Commission raised concerns about cross-shareholding but ultimately found that minority interests in related entities did not confer control, and there were no overlaps in activities that would affect competition.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger may only be prohibited if it is likely to substantially prevent or lessen competition in the relevant market.
- 02
Competition Commission Guidelines
Minority shareholding does not confer control unless it enables the holder to materially influence the policy or strategic direction of the entity.
- 03
Competition Act, No. 89 of 1998
Public interest considerations must be assessed in merger proceedings, but only where there is a material impact.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed transaction, which increases African Revival Investments Holdings' shareholding in Siyahamba Engineering from 36% to 53%, does not result in any product overlap or confer control over related entities through cross-shareholding. The Commission's investigation confirmed that neither ARH's nor Investec's minority interests in Mitsui and Venus confer control, and there are no overlaps in activities between Siyahamba and DCD Dorbyl that would raise competition concerns. The Tribunal agreed with the Commission's conclusion that the transaction is unlikely to substantially prevent or lessen competition. Furthermore, there are no public interest issues arising from the merger. Accordingly, the transaction was unconditionally approved.
Obiter and limits
- The Tribunal noted that cross-shareholding among entities in the rail industry warrants careful scrutiny, but in this case, minority interests did not amount to control.
- The absence of product overlap between the merging parties was a decisive factor in the unconditional approval of the merger.
- Public interest considerations were found to be irrelevant in this transaction due to the lack of material impact.
Court disposition
Merger unconditionally approved.
- The merger between African Revival Investments Holdings (Pty) Ltd and Siyahamba Engineering (Pty) Ltd is unconditionally approved.
- No conditions are imposed on the parties.
Source and reliance status
Competition Tribunal
This page organises the available record for research. Confirm quotations, current status, and subsequent treatment against the official source before relying on the case.
Judgment reading view
Judgment text
The complete available source text.
Competition Tribunal
Judgment
COMPETITION
TRIBUNAL SOUTH AFRICA
Case NO: 128/LM/Dec08
In the matter between:
African Revival Investments Holdings (Pty) Ltd Acquiring Firm
And
Siyahamba Engineering (Pty) Ltd Target Firm
Panel : D Lewis (Presiding Member); U Bhoola (Tribunal Member) and N Manoim (Tribunal Member)
Heard on : 25 March 2009
Decided on : 25 March 2009
Reasons Issued on : 13 May 2009
Reasons for Decision
Approval
[1] On 25 March 2009 the Competition Tribunal issued a Merger Clearance Certificate unconditionally approving the merger between African
Revival Investment Holdings (Pty) Ltd and Siyahamba Engineering (Pty) Ltd. The reasons appear below.
Parties
[2] The acquiring firm is African Revival Investment Holdings (Pty) Ltd (âARIHâ)1, a company incorporated in accordance with the laws of the Republic of South Africa. ARIH is directly controlled by the African Revival Holdings Ltd with 70% share (âARHâ)2 and Investec Bank Ltd3 with 30% shares.
[3] The primary target firm is Siyahamba Engineering (Pty) Ltd (âSiyahambaâ) a company incorporated in accordance with the laws of the Republic of South Africa. Siyahamba is not controlled by any single shareholder.4
Siyahamba controls Siyahamba Automotive SA (Pty)Ltd; Abahle Investments (Pty)Ltd; Reyapele Investments (Pty)Ltd (âReyapele Investmentsâ)5; Nustart Property Holdings (Pty)Ltd and Nustart Property Holdings Two (Pty)Ltd.
Transaction
[4] In terms of the proposed transaction, ARIH intends to acquire a further 17% of the issued share capital in Siyahamba from Mendo Holdings (âMendoâ) such that ARIHâs
existing 36% shareholding will increase to 53% post merger.
Rationale for the Transaction
[5] ARIH sees the proposed transaction as an opportunity to invest in a business with a sound financial history and a favourable outlook.
Mendo (the seller) wishes to divest itself of part of its shareholding in Siyahamba in order to realise part of its investment
and hence gain access to needed capital.
Parties Activities
[6] ARIH holds a diverse portfolio of interest in a number of firms. ARIH itself does not sell any products or render any services. However ARIHâs interests include the supply of plumbing material and sanitary ware (âPlumblinkâ) radio telecommunication services (âFleetcallâ) and transportation of fast moving consumer goods and warehouse management (âVital Distribution Solutionsâ). ARH is an investment holding company with interest in firms that supply electrical locomotives, industrial machines, tools and consumables.
These firms are Allied Putzinger (Pty) Ltd trading as Toolquip, F&H Machine Tools (Pty) Ltd (âF&H Machineâ), Mitsui and Venus.6
[7] Siyahamba is primarily a designer and manufacturer of railway coach and locomotive components. In particular it designs and manufactures train doors, door gears for train doors and train windows.
Competition Analysis
[8] The Commission found that the proposed transaction does not result in any product overlap. According to the Commission this is a move from non controlling minority shareholding to majority shareholding. The Commission submits that the proposed transaction involves players that have shares in entities that are involved in the broad rail industry.7 During its investigations the Commission was concerned about this cross-shareholding by Investec and ARH. As a result of this the Commission analysed whether ARHâs minority shareholding in Mitsui and Venus gives it any form of control. The Commission found that their shareholding does not give them any form of control, and therefore the Commission did not assess the activities of Mitsui and Venus in this transaction. The Commission however did examine the activities of Siyahamba and DCD Dorbyl and it came to the conclusion that there are no overlaps in their activities. We therefore agree with the Commissionâs conclusion that the proposed transaction is unlikely to substantially prevent or lessen
competition.
Conclusion
[9] There are no public interest issues and accordingly the transaction is unconditionally approved.
_______ 13 May 2009
N Maniom Date
Tribunal Member
D Lewis U Bhoola concurring
Tribunal Researcher : Jabulani Ngobeni
For the merging parties : Edward Nathan Sonnenbergs
For the Commission : Makgale Mohlala (Mergers and Acquisitions)
1
ARIH controls Maqeks Investments (Pty)Ltd; Clidet No 779 (Pty)Ltd; Innovative Sanitary Solutions and Zoza investments (Pty)Ltd.
ARIH also has a non controlling interest in Mitsui & Co Railway Solutions (Pty)Ltd (âMitsuiâ) and Venus Railway Solutions
(Pty)Ltd (âVenusâ).
2 ARH is an investment holding company with interest in firms that supply electrical locomotives, industrial machines, tools and consumables.
3 Investec Bank is a specialist banking group that provides a diverse range of financial products and services to a niche client base. Investec Bank controls several subsidiaries, including DCD Dorbyl (Pty) Ltd (âDCD Dorbylâ).
4 Siyahambaâs shareholders are: African Revival Investments 36%; Mendo Holdings 26%; Shiela Ngubane 13%; Paulo Jorge 10%; Henk de Milander 10% and Zarina Maharaj 5%. Siyahamba has an indirect no-controlling interest in several firms, including DCD Dorbyl.
5 Reyapele Investments has 34% share in DCD Dorbyl.
6 Toolquip sells cutting tools, abrasives, tooling, accessories and basic measuring equipment. F&H Machine provides high quality hi-tech conventional and computer numeric controlled machine tools for use in all sectors of the metal working industry. Mitsui and Venus are involved in the supply of and the refurbishment of certain locomotive engines to and for Spoornet.
7 From the acquiring side, ARH has indirect shareholding (through ARIH) in Siyahamba, the primary target firm. ARH also has minority shareholding in Mitsui and Venus, entities involved in the supply of certain electric locomotive engines to Spoornet. Investec, a joint controller of the primary acquiring firm, is also has indirect shareholding (through Africa Revival Investments) in Siyahamba. Investec also controls DCD Dorbyl, which is active in the rail industry as a manufacturer of bogies used in trains; couplers, which joins train carriages as well as assembly of locomotive diesel engines. The target firm Siyahamba is also involved in the rail industry as a designer and manufacturer of train doors, door gears for train doors and train windows and it also has indirect shareholding in DCD Dorbyl.
3
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