Industrial Development Corporation of South Africa Limited v Le-Set Research (RF) Proprietary Limited (LM274Jan18) [2018] ZACT 22 (20 March 2018)
The Tribunal found that the IDC's acquisition of 25.1% of Le-Set's share capital constituted negative control under section 12(2)(g) of the Competition Act, thus requiring notification. The Commission's investigation revealed no overlaps between the parties' activities, as IDC did not operate in the personal and...
Source-derived case information.
- Citation
- [2018] ZACT 22
- Parties
- Applicant: Industrial Development Corporation of South Africa Limited; Respondent: Le-Set Research (RF) Proprietary Limited
- Court
- Competition Tribunal
- Jurisdiction
- South Africa
- Case Number
- LM274Jan18
- Procedural Posture
- Merger Control / Approval of Merger Transaction
- Outcome
- The proposed transaction is approved unconditionally.
- Judges
- Andreas Wessels, Medi Mokuena, Andiswa Ndoni
- Legal Topics
- Merger Notification, Negative Control, Public Interest, Business Rescue
Source-derived case record
Summary, issues, holding and outcome
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Parties
Industrial Development Corporation of South Africa Limited
Applicant
Le-Set Research (RF) Proprietary Limited
Respondent
Procedural Posture
Merger Control / Approval of Merger Transaction
Legal Issues
- 1 Whether the prior acquisition of shares by IDC in Le-Set required notification under the Competition Act.
- 2 Whether the proposed transaction would substantially prevent or lessen competition in any relevant market.
- 3 Whether the transaction raised any public interest concerns.
Ratio Decidendi
The Tribunal found that the IDC's acquisition of 25.1% of Le-Set's share capital constituted negative control under section 12(2)(g) of the Competition Act, thus requiring notification. The Commission's investigation revealed no overlaps between the parties' activities, as IDC did not operate in the personal and homecare products market. The transaction was therefore unlikely to substantially prevent or lessen competition. Furthermore, the transaction was motivated by the need to rescue Le-Set from financial distress and save jobs, but subsequent job losses were unrelated to the merger. No public interest concerns were identified. The Tribunal approved the transaction unconditionally,...
Court Disposition
The proposed transaction is approved unconditionally.
Orders
- The merger between Industrial Development Corporation of South Africa Limited and Le-Set Research (RF) Proprietary Limited is approved unconditionally.
- The issue of prior implementation without notification will be dealt with separately.
Full Case Text
Judgment text and source record
53 paragraphs
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM274Feb18
In the matter between:
Industrial Development Corporation
of South Africa Limited
Primary Acquiring Firm
And
Le-Set Research (RF) Proprietary Limited
Primary Target Firm
Panel
: Andreas Wessels (Presiding Member)
: Medi Mokuena (Tribunal Member)
: Andiswa Ndoni (Tribunal Member)
Heard on : 01 March 2018
Order Issued on : 01 March 2018
Reasons Issued on : 20 March 2018
Reasons for Decision
Approval
[1] On 1 March 2018, the Competition Tribunal ('Tribunal") unconditionally approved the transaction involving the Industrial Development Corporation of South Africa Limited ("IDC") and Le-Sel Research (RF) Proprietary Limited ("Le-Sel").
[2] The notification of this transaction is as a result of a prior implemented acquisition of shares by the IDC in Le-Sel in August 2015. The non-notification of the transaction was discovered by the current legal representatives of the merging parties.[1]
[3] The non-notification of the transaction will be dealt with separately from this approval as a contravention of Section 13A of the Competition Act ("the Act").[2] The Competition Commission ("Commission") indicated that it is currently in negotiations with the merging parties on a potential settlement pertaining to the non-notification of the transaction.
[4] The reasons for approving the proposed transaction follow.
Parties to the proposed transaction
Primary acquiring firm
[5] The primary acquiring firm is the JDC. The IDC was established in terms of the Industrial Development Corporation Act 22 of 1940 and is wholly-owned and controlled by the South African Government.
[6] The IDC was established to support and enhance industrial development in South Africa, as well as the rest of Africa, with the aim of boosting economic growth and development. This is achieved by providing funding to entrepreneurs starting new enterprises or supporting existing companies that want to expand their operations.
[7] The IDC controls various firms.
Primary target firm
[8] The primary target firm is Le-Sel, a private company incorporated in accordance with the company laws of South Africa. At the time of the transaction Le-Sel was controlled by The Frodsham Family, Trinitas Fund General Partner (Pty) Ltd and the Trustees of the Le-Sel Management Investment Trust.
[9] Le-Set controls Biz Afrika 884 (Pty) Ltd and Biz Afrika Beauty Factory (Pty) Ltd.
[10] Le-Set is a personal and home care manufacturer. Its product range consists of inter alia aerosols, toiletries and cosmetics, fragrances and ethnic haircare products.
Proposed transaction and rationale
[11] In August 2015 the JDC acquired 25.1% of the issued share capital of Le-Set (also see paragraphs 2 and 3 above). The Commission found that this shareholding gave the JDC "negative" control over Le-Set in terms of section 12(2)(g) of the Act.
[12] According to the merging parties the main reason for the proposed transaction was to assist the target firm which was in financial stress in 2015. In addition to this, as a result of the transaction, a vast number of employees were rescued from having been retrenched at that time.
Impact on competition
[13] The Commission found no overlaps between the activities of the merging parties, since the IDC has no interests in businesses that supply personal and homecare products. The Commission therefore concluded that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market in South Africa. We concur with the Commission's finding.
Public interest
[14] The merging parties submitted that at the time one of the aims of the transaction was to save 569 jobs and to prevent a further decline of the Le-Set business.
[15] The Commission's investigation confirmed that Le-Sel was indeed in financial stress at the time that the transaction took place.
[16] Le-Sel was however placed under voluntary business rescue in December 2017. The Commission found that certain job losses around the time of the business rescue were not related to the proposed transaction, since the transaction had already taken place in 2015.
[17] The Commission concluded that the proposed transaction raises no public interest concerns. We have no reason to doubt the Commission's findings.
Conclusion
[18] In light of the above, we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. In addition, no public interest issues arise from the proposed transaction. Accordingly, we approve the proposed transaction unconditionally.
[19] As stated above, the issue of implementation of the transaction without notification will be dealt with separately to the assessment on the merits.
Mr AW Wessels
Ms Andiswa Ndoni and Ms Medi Mokuena concurring
20 March 2018
Tribunal Case Manager : Caroline Sserufusa
For the merging parties : Neo Moshimane of DM5 Incorporated
For the Commission :
Simphiwe Gumede
[1] Also see Transcript, pages 5 and 6.
[2] Act No. 89 of 1998, as amended.