Fluxrab Investments no. 90 (Pty) Ltd and Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd (49/LM/Jun04) [2004] ZACT 59 (13 September 2004)
- Citation
- [2004] ZACT 59
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, T Orleyn
- Case number
- 49/LM/Jun04
More details
- Court
- Competition Tribunal
- Panel
- D Lewis, N Manoim, T Orleyn
- Case number
- 49/LM/Jun04
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that Fluxrab Investments no. 90 (Pty) Ltd is a dormant entity with no trading activities, and the acquisition of Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd would not result in any overlap of activities or removal of a competitor. The transaction is a management buy-out designed to achieve black economic empowerment and establish a distinct South African identity for the business. There are no competition concerns as the transaction does not affect the structure of the relevant market, nor does it raise any public interest concerns. Accordingly, the merger was approved without conditions.
Court disposition
Merger approved without conditions.
Orders
- The merger between Fluxrab Investments no. 90 (Pty) Ltd and Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd is approved without conditions.
02
Material facts
Parties
Fluxrab Investments no. 90 (Pty) Ltd
Applicant Counsel: Fluxmans AttorneysMetcash Trading Africa Ltd
RespondentMetcash Aviation (Pty) Ltd
Respondent03
Procedural history
Posture
Large Merger / Merger Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed management buy-out merger raises competition concerns in the relevant market.
- 02
Whether the transaction raises any public interest concerns.
Party arguments
- Applicant
- The applicant argued that Fluxrab Investments no. 90 (Pty) Ltd is a dormant company with no trading history, and that the acquisition of Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd would not result in any overlap of activities or removal of a competitor. The transaction is structured to achieve black economic empowerment and establish a distinct identity for the South African operations, separate from Metro's Australian subsidiary.
- Respondent
- The respondent, Metro Cash and Carry Ltd, did not oppose the merger and indicated that the transaction was necessary as listing Metcash on the JSE Securities Exchange South Africa would not enhance shareholder wealth or achieve objectives such as black economic empowerment. The Commission found no competition or public interest concerns.
05
Court’s reasoning
Legal principles
- 01
Competition Act, No. 89 of 1998
A merger will not be prohibited if it does not substantially prevent or lessen competition in any relevant market.
- 02
Competition Act, No. 89 of 1998
Public interest considerations must be assessed in terms of section 12A(3) of the Competition Act.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that Fluxrab Investments no. 90 (Pty) Ltd is a dormant entity with no trading activities, and the acquisition of Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd would not result in any overlap of activities or removal of a competitor. The transaction is a management buy-out designed to achieve black economic empowerment and establish a distinct South African identity for the business. There are no competition concerns as the transaction does not affect the structure of the relevant market, nor does it raise any public interest concerns. Accordingly, the merger was approved without conditions.
Obiter and limits
- The Tribunal noted that the structure of the transaction was influenced by the desire to achieve black economic empowerment and to distinguish the South African operations from Metro's Australian subsidiary.
- The Tribunal observed that none of the shareholders in Fluxrab Investments provide services that overlap with those of the target firms.
Court disposition
Merger approved without conditions.
- The merger between Fluxrab Investments no. 90 (Pty) Ltd and Metcash Trading Africa Ltd and Metcash Aviation (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
REPUBLIC
OF SOUTH AFRICA
Case no.: 49/LM/Jun04
In the large merger between:
Fluxrab Investments no. 90 (Pty) Ltd
and
Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd
________________
Reasons
Introduction
On 26 August 2004 the Tribunal approved the merger between Fluxrab Investments No. 90 (Pty) Ltd and Metcash Trading Africa Ltd and Metcash Aviation (Pty) Ltd without conditions. The reasons are set out below.
The transaction
This is a management buy-out in which Fluxrab Investments no 90 (Pty) Ltd (âFluxrabâ) is acquiring the entire issued share capital of Metcash Trading Africa Ltd (âMetcashâ) and Metcash Aviation (Pty) Ltd (âMetcash Aviationâ) from Metro Cash and Carry Ltd (âMetroâ). The transaction excludes Metcash Trading Limited Australia.
The shareholding in Fluxrab, the primary acquiring firm, will be as follows:
Management Consortium 35% Nedcor Investments1 30% Black Economic Empowerment Consortium (âBEEâ)2 25% Metaf Share Incentive Scheme 10%
The management consortium, Nedcor Investment, and the BEE consortium will jointly control Fluxrab.
The transaction, in its current form, was concluded because Metroâs major shareholders did not believe that listing Metcash on the JSE Securities Exchange South Africa would enhance Metroâs shareholder wealth nor achieve certain objectives such as black economic empowerment and establishing a distinct identity from Metroâs Australian subsidiary.
Effect on Competition
There is no overlap in the activities of the merging parties. Fluxrab is a dormant company, which has never traded.3 Metcash, primarily, has interests in the market for the wholesale and distribution of fast moving consumer foods.
The merger will not result in the removal of a competitor as the transaction involves a management buyout and will accordingly have no effect on competition in the relevant market.
Public interest
The transaction raises no public interest concerns.
___ 13 September 2004
D Lewis Date
Concurring: N Manoim, T Orleyn
For the merging parties: Fluxmans Attorneys
For the Commission: K Ramathula
1 Nedcor investments is controlled by Nedbank Ltd, a subsidiary of Nedcor Limited. Nedcorâs main shareholders are Old Mutual Life Insurance (South Africa) Limited with 33% and Old Mutual (South Africa Limited), with 18%.
2 The BEE consortium consists of African Renaissance Holdings Ltd, South African National Taxi Association, Contralesa Investment Holdings (Pty) Ltd, Women Development Bank Investment Holdings (Pty) Ltd and Kumnandi (consortium of black individuals and the National Tourism and Hospitality Association). The different members of the consortium have interests in other firms, none of which are relevant to this transaction.
3 Nedcor Investments, Old Mutual Life Insurance and the African Renaissance consortium do not provide any services that overlap with those of the target firm.
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