DHN Drinks (Pty) Ltd v Sedibeng Breweries (Pty) Ltd (57/LM/May12) [2012] ZACT 67; [2012] 2 CPLR 445 (CT) (8 August 2012)
- Citation
- [2012] ZACT 67
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Andreas Wessels, Yasmin Carrim
- Case number
- 57/LM/May12
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Andreas Wessels, Yasmin Carrim
- Case number
- 57/LM/May12
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger is essentially an internal restructuring of ownership in Sedibeng Breweries, aligning shareholding with the joint venture partners' existing arrangements. The transaction does not alter the structure or dynamics of the beer market, as the parties already operate jointly through Brandhouse. There is no overlap in activities between DHN and Sedibeng, and the vertical relationship existed prior to the merger. The Commission's analysis confirmed that the merger would not result in a substantial lessening or prevention of competition. Furthermore, the transaction does not raise public interest concerns, as no retrenchments are anticipated and employment opportunities have been created. Accordingly, the Tribunal approved the merger without conditions.
Court disposition
Merger approved unconditionally.
Orders
- The merger between DHN Drinks (Pty) Ltd and Sedibeng Breweries (Pty) Ltd is approved without conditions.
02
Material facts
Parties
DHN Drinks (Pty) Ltd
Applicant Counsel: Anthony NortonSedibeng Breweries (Pty) Ltd
RespondentAmounts and remedies
- DHN Shareholding in Sedibeng Post Merger (diageo): ZAR 42.25
- DHN Shareholding in Sedibeng Post Merger (heineken): ZAR 42.25
- DHN Shareholding in Sedibeng Post Merger (nbl): ZAR 15
03
Procedural history
Posture
Merger Application / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger constitutes an internal restructuring rather than a substantive change in market structure.
- 02
Whether the merger is likely to result in a substantial lessening or prevention of competition in the relevant markets.
- 03
Whether the transaction raises any public interest concerns, including potential retrenchments.
Party arguments
- Applicant
- The merging parties argued that the transaction is an internal restructuring to align ownership of Sedibeng Breweries with the existing joint venture arrangements among Diageo, Heineken, and Namibian Breweries Limited. They submitted that the merger would not alter market dynamics or competitive conditions, as the parties already market, distribute, and sell their products jointly through Brandhouse. They further contended that no retrenchments would occur and that the establishment of Sedibeng had created employment opportunities.
- Respondent
- The Competition Commission concurred with the merging parties, stating that the transaction does not change the structure or dynamics of the relevant markets. The Commission found no overlap in the activities of DHN and Sedibeng, noting only a pre-existing vertical relationship. It concluded that the merger is unlikely to substantially lessen or prevent competition and recommended unconditional approval.
05
Court’s reasoning
Legal principles
- 01
Competition Act, 89 of 1998
A merger that constitutes an internal restructuring and does not alter market structure or competitive dynamics is unlikely to raise competition concerns.
- 02
Competition Act, 89 of 1998
The assessment of public interest factors includes consideration of employment effects, and where no retrenchments are anticipated, the transaction is less likely to be opposed on public interest grounds.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger is essentially an internal restructuring of ownership in Sedibeng Breweries, aligning shareholding with the joint venture partners' existing arrangements. The transaction does not alter the structure or dynamics of the beer market, as the parties already operate jointly through Brandhouse. There is no overlap in activities between DHN and Sedibeng, and the vertical relationship existed prior to the merger. The Commission's analysis confirmed that the merger would not result in a substantial lessening or prevention of competition. Furthermore, the transaction does not raise public interest concerns, as no retrenchments are anticipated and employment opportunities have been created. Accordingly, the Tribunal approved the merger without conditions.
Obiter and limits
- The establishment of Sedibeng Breweries has contributed to increased competition in the South African beer market, enabling the parties to compete more effectively with the dominant South African Breweries Ltd.
- The transaction demonstrates the importance of aligning ownership structures with operational realities in joint ventures to ensure continued compliance with competition law.
Court disposition
Merger approved unconditionally.
- The merger between DHN Drinks (Pty) Ltd and Sedibeng Breweries (Pty) Ltd is approved without conditions.
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 OF SOUTH AFRICA
Case No: 57/LM/May12
(015107)
In the matter between:
DHN Drinks (Pty) Ltd .........................................................................Acquiring Firm
And
Sedibeng Breweries (Pty) Ltd ..........................................................................Target Firm
Panel : Norman Manoim (Presiding Member), Andreas Wessels (Tribunal Member) Yasmin Carrim (Tribunal Member)
Heard on : 18 July 2012
Order issued on : 18 July 2012
Reasons issued on : 08 August 2012
Reasons for Decision
Approval
On 18 July 2012 the Competition Tribunal (“Tribunal”) unconditionally approved the merger between DHN Drinks (Pty) Ltd and Sedibeng Breweries (Pty) Ltd. Our reasons for approving the transaction are set out below.
Background
In 2003 Diageo Highlands, Heineken International and Namibian Breweries Limited consolidated their sales, marketing and distribution
functions by forming a cost-sharing joint venture known as Brandhouse Beverages (Pty) Ltd (“Brandhouse”)1 under which they currently market, distribute and sell their products in South Africa.
The merging parties and Competition Commission (the “Commission”) agree that the present transaction is an ‘internal
restructuring’2 to bring further effect to existing agreements between Diageo Highlands, Heineken and Namibian Breweries Limited.
The parties to the transaction
The acquiring firm is DHN Drinks (Pty) Ltd (“DHN”), a company incorporated in terms of the laws of the Republic of South Africa. DHN was formed through a transaction we approved in 20083 and is jointly controlled by:
Diageo Highlands4 (“Diageo”) 42.25%;
Heinkeken International5 (“Heineken”) 42.25%; and
Namibian Breweries Limited6 (“NBL”) 15%.
DHN, which is a brand holding and profit sharing company with no employees, was formed by Diageo, Heineken and NBL as a special purpose vehicle in order to continue their relationship after the successful implementation and operation of Brandhouse which is still in existence today.
The target firm, Sedibeng Breweries (Pty) Ltd (“Sedibeng”), is a company incorporated in terms of the laws of the Republic of South Africa and operates as a brewery located in the south of Johannesburg. Sedibeng’s current shareholders are Heineken (75%) and Diageo (25%). Sedibeng’s entire output is dedicated to the DHN shareholders and is distributed by Brandhouse.
The Sedibeng brewery plant was established by Heineken and Diageo for the purpose of brewing their own products in South Africa and in order to effectively compete with the dominant South African Breweries Ltd (“SAB”).
The transaction
The transaction entails DHN acquiring 100% interest in Sedibeng from Heineken and Diageo. Post merger, Diageo, Heineken and NBL will each own indirect shareholding in Sedibeng through their DHN shareholding.
NBL will therefore acquire 15% indirect shareholding in Sedibeng, Diageo will increase its shareholding in Sedibeng from 25% to 42.25% and Heineken’s shareholding will reduce to 42.25%.
The proposed merger therefore results in Diageo, Heineken and NBL all having indirect shareholding in Sedibeng in direct proportion to their DHN shareholding.7
Competition Analysis
At the hearing the Competition Commission (“the Commission”) stated that “[the] parties have also submitted that the establishment of the Sedibeng Breweries has helped established them as a manufacturing presence in South Africa and can therefore compete effectively with SAB. Also, the merging parties have further indicated that the merger will enhance competition in the beer markets, as they may now effectively compete with SAB.”8
Further, the parties herein are already marketing, selling and distributing their beer, ciders and ready to drink brands through their joint venture, Brandhouse, which we previously approved.9
DHN already holds the rights to the alcoholic beverage products brewed at Sedibeng. The Commission found that there is no overlap in the activities of DHN and Sedibeng. There is a vertical relationship between the merging parties but this existed pre-merger.
Further at the hearing, in reply to questions from Tribunal, the parties confirmed that they notified the 2008 transaction as a sales, marketing and distribution joint venture in terms of which their respective products would be pooled through Brandhouse and that Brandhouse would have discretion over their pricing.10
The present transaction does not change the structure and dynamics11 of the markets in which the parties operate.
The Commission therefore found that the proposed merger is unlikely to lead to a substantial lessening or prevention of competition and recommends unconditional approval thereof.
Public Interest
The merging parties submit that they do not anticipate that any retrenchments will occur as a result of the proposed transaction as it is merely an internal restructuring of ownership in Sedibeng12 by all three joint venture parties.
The establishment of Sedibeng has in fact lead to the creation of employment opportunities.
Conclusion
We accept the Commission’s conclusions and their analysis of the above transaction. We further accept that, on the information submitted, the proposed transaction does not lead to any changes in market structure and that it is essentially a restructuring in line with the joint venture partners’ agreements.
The above merger is therefore approved without conditions.
____ 08 August 2012
Yasmin Carrim DATE
N Manoim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Anthony Norton of Nortons Incorporated.
For the Commission: Thelani Luthuli and Grace Mohamed
1Brandhouse’s product portfolio includes brands such as Johnnie Walker, Smirnoff, J&B, Bell’s, Captain Morgan, Jose Cuervo, Baileys, Heineken, Amstel, Windhoek and Guinness. http://www.brandhouse.co.za/BrandhouseStory.aspx
2Transcript page 2.
3Tribunal Case No: 17/LM/Feb08.
4A public company incorporated in the Netherlands and listed on the both the New York Stock Exchange and the London Stock Exchange.
5A public company incorporated in the Netherlands and listed on the Euronext Stock Exchange in Amsterdam.
6A public company incorporated in Namibia and listed on the Namibian Stock Exchange.
7See paragraph 4 above.
8Transcript page 2.
9Ibid.
10Transcript page 5-6.
11Form CC4(2) submitted by DHN at page 14 of the Merger Record.
12Transcript page 2.
5
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