Business Venture Investments No 1347 (Pty) Ltd v DD’s Cash and Carry (Pty) Ltd (63/LM/OCT10) [2010] ZACT 79 (17 November 2010)

COMPETITION TRIBUNAL OF SOUTH AFRICA

Case No: 63/LM/OCT10

In the matter between:

Business Venture Investments No 1347 (Pty) Ltd ….....................Acquiring Firm

And

DD’s Cash and Carry (Pty) Ltd …..........................................................Target Firm

Panel : Norman Manoim (Presiding Member) Yasmin Carrim (Tribunal Member) Andreas Wessels (Tribunal Member)

Heard on : 13 October 2010

Order issued on : 13 October 2010

Reasons issued on : 17 November 2010

Reasons for Decision

Approval

On 13 October 2010, the Competition Tribunal (“Tribunal”) unconditionally approved the acquisition of DD’s Cash and Carry (Pty) Ltd by Business Venture Investments No 1347 (Pty) Ltd. The reasons for approving the transaction follow.

The parties and their activities

The primary acquiring firm is Business Venture Investments No 1347 (Pty) Ltd (“Newco”) a subsidiary of Masscash (Pty) Ltd (“Masscash”), a company part of the Massmart Group, Massmart Holdings Limited (“Massmart”).

Newco is a shelf company and has not previously traded. Massmart trades through various companies that fall under its four divisions namely Massdiscounters1, Masswarehouse2, Massbuild3 and Masscash4.

The primary target firm is DD’s Cash and Carry (Pty) Ltd trading as JD’s Cash and Carry (Pty) Ltd (“JD’s”). JD’s conducts business as a retailer and wholesaler of grocery products to customers in the LSM 2 to 6 market through its store located in Vosloorus, Gauteng. In this store, JD’s has a butchery, bakery, take-away counter and sale of fresh produce and other perishables.

The proposed transaction

Masscash, through its subsidiary Newco, is to acquire a 51% interest in JD’s. The existing shareholders of JD’s will retain 49% of the interest in the business. Minority protections are afforded to these shareholders.

Rationale for the proposed transaction

Massmart through Masscash wants to expand its presence in the retail grocery segment. More particularly to grow its mass-market in the urban and peri-urban areas where large incumbents are consolidating their respective market shares, and where Massmart currently has no presence. Masscash’s food retail hybrid strategy is intended to provide a combined retail/wholesale format that will cater for the needs of LSM 2-6 customers and small independent trades.

The rationale for this transaction for the target firm, is that Spirydon Yiannopoulus, a trustee and beneficiary in the SY Trust that currently owns 50% interest in JD’s, wants to realise his interest. Further, it is expected that Massmart, as a result of this transaction, will bring additional resources which will allow JD’s business to expand.

Relevant markets and impact on competition

Horizontal analysis

There is a horizontal overlap in respect of wholesale trade in grocery products to the customers in the LSM 2-6 socio-economic groups in the Gauteng province. The geographic overlap occurs with the acquiring firm’s nearest wholesale store being the Springs Cash and Carry. However, it was found that this market has the presence of sufficient effective competitors5 to curb any anti competitive behaviour by the merged entity.

Vertical analysis

Additionally, there exists a vertical relationship between the merging parties. This is because JD’s has previously made ad hoc purchases from the primary acquiring firm. The figures concerning such purchases are however too insignificant to raise any foreclosure concerns or issues.

The customers of the merging parties were contacted and indicated no objection to the merger provided that the merger does not change the present buying conditions situating to the worst.

Public interest

No public interest concerns arise as a result of this proposed transaction.

Conclusion

The proposed transaction is approved without conditions since it is unlikely to substantially prevent or lessen competition in any potential relevant market.

DATE: 17 November 2010

Norman Manoim

Yasmin Carrim and Andreas Wessels concurring

Tribunal Researcher : Mahashane Shabangu

For the merging parties : Chris Charter and Pia Harvey from Cliffe

Dekker Hofmeyr

For the Commission : Mogalane Matsimela of the Mergers and

Acquisitions Division

1Comprises of the Game stores, which offers merchandise and non perishable groceries to end consumers in 5-10 socio-economic groups. Dion Wired which offers a more upmarket range of mainly electrical and electronic merchandise to the upper end consumer.

2Comprises of Makro which trades in range of food, liquor and general merchandise to commercially affiliated sellers and upper income end consumers in the 6-10 socio economic groups.

3Builders Warehouse, Builders Express and Builders Trade Depot which sell hardware and home improvement products and building materials.

4Comprises of Jumbo Cash and Carry which distributes cosmetic, toiletries and hair products for sale to lower to middle income urban customer. Also comprises of CBW which trades in basic grocery products and limited range of general merchandise . In this list there is also Shield which is as voluntary buying group serving independently owned food wholesale and retail outlet servicing customers in the LSM 2-6 socio-economic groups.

5 Such as Shoprite, Spar, OK, Pick ‘n Pay and Boxer.

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