Hosken Consolidated Investments Ltd v KWV Holdings Ltd (26/LM/Apr11) [2011] ZACT 26 (6 May 2011)
- Citation
- [2011] ZACT 26
- Status
- Judgment
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Yasmin Carrim, Andreas Wessels
- Case number
- 26/LM/Apr11
More details
- Court
- Competition Tribunal
- Panel
- Norman Manoim, Yasmin Carrim, Andreas Wessels
- Case number
- 26/LM/Apr11
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the acquisition by HCI of an additional 0.05% shareholding in KWV would result in HCI attaining sole control of KWV, thereby triggering a mandatory offer to other shareholders under the SRP Code. The Tribunal agreed with the Commission that there is no overlap or vertical integration between the activities of HCI and KWV, and that the merger would not substantially prevent or lessen competition in the relevant markets for bottled wine, bottled spirits, bulk spirits, contract bottling, and carbonated grape juice. No public interest concerns, including employment issues, were raised by the parties or the relevant union. Accordingly, the Tribunal approved the merger without conditions.
Court disposition
Merger approved without conditions.
Orders
- The large merger between Hosken Consolidated Investments Limited and KWV Holdings Limited is approved without conditions.
02
Material facts
Parties
Hosken Consolidated Investments Limited
Applicant Counsel: Mark GardenKWV Holdings Limited
Respondent Counsel: Ruthendo HlatshwayoAmounts and remedies
- Percentage of KWV Share Capital Acquired: 0.05
- HCI Post Merger Shareholding in KWV (%): 35
03
Procedural history
Posture
Large Merger Review / Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed acquisition by HCI of an additional 0.05% shareholding in KWV would result in sole control and trigger a mandatory offer under the SRP Code.
- 02
Whether the merger would substantially prevent or lessen competition in the relevant markets for bottled wine, bottled spirits, bulk spirits, contract bottling, and carbonated grape juice.
- 03
Whether any public interest concerns, including employment, arise from the transaction.
Party arguments
- Applicant
- HCI argued that acquiring the additional 0.05% shareholding in KWV would enable it to attain sole control, as required by its investment strategy. HCI asserted that this control would allow it to deploy its skilled management team to improve KWV's underperforming business. HCI maintained that there is no overlap or vertical integration between its operations and those of KWV, and that the transaction would not negatively affect competition or public interest.
- Respondent
- KWV did not oppose the transaction and agreed with the Commission's assessment that there is no overlap or vertical relationship between the parties. KWV confirmed that the merger would not result in any adverse competition effects or employment issues. The Food and Allied Workers Union was notified, and no concerns were raised.
05
Court’s reasoning
Legal principles
- 01
Competition Act 89 of 1998
A merger will only be prohibited if it is likely to substantially prevent or lessen competition in the relevant market.
- 02
Securities Regulation Panel Code
Where an acquiring firm attains sole control and exceeds the prescribed threshold, a mandatory offer to remaining shareholders is required.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the acquisition by HCI of an additional 0.05% shareholding in KWV would result in HCI attaining sole control of KWV, thereby triggering a mandatory offer to other shareholders under the SRP Code. The Tribunal agreed with the Commission that there is no overlap or vertical integration between the activities of HCI and KWV, and that the merger would not substantially prevent or lessen competition in the relevant markets for bottled wine, bottled spirits, bulk spirits, contract bottling, and carbonated grape juice. No public interest concerns, including employment issues, were raised by the parties or the relevant union. Accordingly, the Tribunal approved the merger without conditions.
Obiter and limits
- The Tribunal noted that HCI's strategy of acquiring sole control aligns with its role as an investment company seeking to turn around underperforming businesses.
- The notification of the Food and Allied Workers Union and the absence of employment concerns were considered as part of the public interest assessment.
Court disposition
Merger approved without conditions.
- The large merger between Hosken Consolidated Investments Limited and KWV Holdings Limited 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:26/LM/Apr11
In the matter between:
Hosken Consolidated Investments Limited …............................................Acquiring Firm
And
KWV Holdings Limited …...................................................................................Target Firm
Panel : Norman Manoim (Presiding Member), Yasmin Carrim (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on : 04 May 2011
Order issued on : 05 May 2011
Reasons issued on : 06 May 2011
Reasons for Decision
Approval
On 4 May 2011 the Competition Tribunal (“Tribunal”) approved the large merger between Hosken Consolidated Investments
Limited (“HCI”) and KWV Holdings Limited (“KWV”). The Tribunal’s reasons for approving the transaction are set out below.
The Parties to the transaction
The primary acquiring firm is Hosken Consolidated Investments Limited,1 a public investment company listed on the Johannesburg Stock Exchange. HCI’s major shareholder is the South African Clothing and Textile Workers Union (“SACTWU”) with 37.9% of the issued share capital in HCI.
The target firm, KWV Holdings Limited,2 is a JSE listed public investment company which owns and operates one of the leading wine and spirits producers in South Africa. HCI currently owns 34.95% of the issued share capital in KWV.
HCI has been involved in a number of transactions increasing its stake in KWV with the goal of attaining sole control of KWV. This proposed transaction is a further step by HCI towards their goal.
The activities of the parties
The Acquiring Firm:
HCI has investments in a diversified range of business areas and industries such as Media & Broadcasting, Casinos, Hotel &
Leisure, Clothing & Textiles, Transport, Energy, Property and Technology:
Gaming Hotels and Leisure
TSOGO INVESTMENT HOLDING COMPANY74.7%
VUKANI GAMING CORPORATION100%
Media and Broadcasting
MIDI TV (e.TV)63% YIRED63% E SAT.TV63%
THREE BLIND MICE COMMUNICATIONS71.3%
Transport
GOLDEN ARROW BUS SERVICE100%
Energy
MONTAUK ENERGY CAPITAL91.5% HCI KHUSELA COAL80%
Property and Exhibitions GALLAGHER100%
Industrial FORMEX90%
Services and Technology Business Systems Group (Africa)40% Syntell55% Isilumko30.1% Limtech58.9%
Clothing and Textiles Seardel Limited70%
The above Graphic Table is from the HCI website.3
The Target Firm:
KWV is essentially a vertically integrated wine and spirits business, owns a wine farm, and procures grapes and wine for the production of wine and spirits. KWV owns one of the largest premium brands of wine in the country and also has a non controlling interest in the Paarl Bottling Company.
KWV controls the following subsidiaries:
KWV South Africa (Pty) Ltd;
KWV International (Pty) Ltd;
KWV Intellectual Property (Pty) Ltd;
KWV Projects (Pty) Ltd;
Kaapse Wynprodusente Vereniging (Pty) Ltd;
Wijngaarg Beleggings (Pty) Ltd;
Edward Cavendish and Sons (Pty) Ltd;
KWV International Holdings Gmbh;
KWV International (Europe) Ltd; and
Golden Kaan South Africa (Pty) Ltd.
There is no overlap between the activities of the merging parties nor are there any firms in the broader acquiring firm in a vertical
relationship with the target firm.
The Rationale
Through the present transaction, HCI intends acquiring 0.05% of the issued share capital of KWV as a further step in its goal of attaining sole control of KWV.
The result of the acquisition of the 0.05% will result in HCI owning 35% of the issued share capital of KWV and thereby become obliged, in terms of the Securities Regulation Panel (“SRP”) Code to extend a mandatory offer to the other shareholders of KWV.
Depending on the extent of the acceptance of the mandatory offer by the other shareholders, HCI could be placed in a position to acquire the entire issued share capital of KWV.
HCI further states that by acquiring sole control of KWV, it would be in the position to employ its skilled management team in turning around KWV’s underperforming business. This goal seems to correlate with HCI’s role as an investment company.
The relevant market and the impact on competition
The parties and Commission agree that the relevant market is the market for the production and sale of bottled wine, bottled spirits, bulk spirits, contract for bottling and carbonated grape juice.
There is no overlap in the activities of the parties and the Commission is of the opinion that that this merger is unlikely to substantially prevent or lessen competition in the relevant market.
Public Interest
The merging parties have notified the Food and Allied Workers Union (“FAWU”) in their capacity as the employees’
representative and no employment issues were raised.
Conclusion
We agree with the Commmission that as there is no overlap between the activities of the merging parties nor vertical integration, the merger does not raise any competition concerns Furthermore no public interest grounds have been raised that would not justify approval of the merger.
Accordingly, the above merger is approved without conditions.
____ 06 May 2011
N Manoim DATE
Y Carrim and A Wessels concurring.
Tribunal Researcher: Songezo Ralarala
For the merging parties: Mark Garden and Ruthendo Hlatshwayo of Edward Nathan Sonnenbergs,
For the Commission: Lameez Vania, Mfundo Ngobese, Marten van Hoven
1http://www.hci.co.za/
2http://www.kwv.co.za/
3http://www.hci.co.za/corp_profile.htm
7
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