K2021544474 (South Africa) (Pty) Ltd v Kwatani Global (Pty) Ltd (LM052Aug21) [2021] ZACT 74 (14 October 2021)
- Citation
- [2021] ZACT 74
- Status
- Order
- Jurisdiction
- South Africa
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Enver Daniels, Thando Vilakazi
- Case number
- LM052Aug21
More details
- Court
- Competition Tribunal
- Panel
- Andreas Wessels, Enver Daniels, Thando Vilakazi
- Case number
- LM052Aug21
On this page
Professional case brief
Research organized from the available case record
01
Holding and result
The Tribunal found that the proposed merger between Sandvik SRP and Kwatani Global would not substantially prevent or lessen competition in the relevant markets for horizontal screens and pan feeders supplied to mining customers, as the combined market shares were modest and effective competition would remain from several other firms. No competition concerns were raised by customers or competitors. Regarding public interest, the Tribunal accepted that recent retrenchments in the Sandvik Group were not merger-specific and that the transaction would not negatively affect employment. However, the merger would result in a reduction of HDP/BEE shareholding in the target firms. To address this, the Tribunal imposed a condition requiring Sandvik Holdings SA to ensure that a minimum BEE shareholding is established in Sandvik SRP post-merger. The merger was approved subject to this condition.
Court disposition
Merger conditionally approved subject to a BEE shareholding requirement.
Orders
- The proposed merger is approved subject to the condition that Sandvik Holdings SA ensures that, from the implementation date, a minimum BEE shareholding in Sandvik SRP is established on mutually acceptable commercial terms.
- No other public interest conditions are imposed.
02
Material facts
Parties
K2021544474 (South Africa) (Pty) Ltd (to be renamed Sandvik SRP RSA (Pty) Ltd)
Applicant Counsel: Marianne WagenerKwatani Global (Pty) Ltd
Respondent03
Procedural history
Posture
Merger Application / Order Granting Conditional Approval
04
Questions and positions
Legal issues
- 01
Whether the proposed merger between Sandvik SRP and Kwatani Global is likely to substantially prevent or lessen competition in the relevant markets.
- 02
Whether the merger raises any public interest concerns, including employment and BEE shareholding.
- 03
Whether conditions should be imposed to address any reduction in HDP/BEE ownership.
Party arguments
- Applicant
- The merging parties argued that the transaction would not negatively affect competition, as their combined market shares in horizontal screens and pan feeders for mining customers would remain modest, and several competitors would continue to operate in the market. They further submitted that the transaction would not result in any negative employment effects and that retrenchments within the Sandvik Group were unrelated to the merger. The parties acknowledged a reduction in HDP/BEE shareholding but accepted the imposition of a condition to address this.
- Respondent
- The Competition Commission contended that the merger was unlikely to substantially prevent or lessen competition, given the presence of other significant competitors and the relatively small market shares of the merging parties. The Commission found no evidence that recent retrenchments were merger-specific and recommended approval of the transaction subject to a condition requiring Sandvik Holdings SA to ensure a minimum BEE shareholding in Sandvik SRP post-merger.
05
Court’s reasoning
Legal principles
- 01
Competition Act 89 of 1998
A merger may only be approved if it is unlikely to substantially prevent or lessen competition in any market.
- 02
Competition Act 89 of 1998
Public interest considerations, including the effect on employment and the spread of ownership, must be assessed in merger proceedings.
- 03
Competition Act 89 of 1998
Where a merger results in a reduction of HDP/BEE ownership, conditions may be imposed to restore or enhance such ownership.
06
Ratio, limits and disposition
Ratio decidendi
The Tribunal found that the proposed merger between Sandvik SRP and Kwatani Global would not substantially prevent or lessen competition in the relevant markets for horizontal screens and pan feeders supplied to mining customers, as the combined market shares were modest and effective competition would remain from several other firms. No competition concerns were raised by customers or competitors. Regarding public interest, the Tribunal accepted that recent retrenchments in the Sandvik Group were not merger-specific and that the transaction would not negatively affect employment. However, the merger would result in a reduction of HDP/BEE shareholding in the target firms. To address this, the Tribunal imposed a condition requiring Sandvik Holdings SA to ensure that a minimum BEE shareholding is established in Sandvik SRP post-merger. The merger was approved subject to this condition.
Obiter and limits
- The Tribunal noted that retrenchments within the Sandvik Group were not related to the merger and that some retrenched employees were subsequently re-employed.
- The Tribunal observed that the proposed transaction raised no other public interest concerns beyond the reduction in HDP/BEE shareholding.
Court disposition
Merger conditionally approved subject to a BEE shareholding requirement.
- The proposed merger is approved subject to the condition that Sandvik Holdings SA ensures that, from the implementation date, a minimum BEE shareholding in Sandvik SRP is established on mutually acceptable commercial terms.
- No other public interest conditions are imposed.
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
Order
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case no: LM052Aug21
K2021544474 (South Africa) (Pty) Ltd (to be renamed
Primary Acquiring Firm
Sandvik SRP RSA (Pty) Ltd)
And
Kwatani Global (Pty) Ltd
Primary Target Firm
Heard on:
14 October 2021
Order Issued on: 14 October 2021
Reasons issued on: 29 October 2021
REASONS
FOR DECISION
[1] On 14 October 2021, the Competition Tribunal (“Tribunal”)
conditionally approved a large merger involving K2021544474 (South Africa) (Pty) Ltd (to be renamed Sandvik SRP RSA (Pty) Ltd) (“Sandvik SRP”) and Kwatani Global (Pty) Ltd (“Kwatani Global”).
Merging parties and their activities
[2] Sandvik SRP is a newly formed company incorporated in accordance with the laws of the Republic of South Africa and does not control any firms. Sandvik SRP is controlled by Sandvik Holdings Southern Africa Limited (“Sandvik Holdings”). Sandvik Holdings is in turn controlled by Sandvik Aktiebolag plc (“Sandvik AB”). Sandvik AB is listed on the Stockholm Stock Exchange and is not controlled by any individual shareholder. Sandvik SRP and the firms directly or indirectly
controlling it will be referred to as the “Sandvik Group”. In South Africa, the Sandvik Group controls several entities[1].
[3] Globally the Sandvik Group is active in several areas including tools
and tooling systems for industrial metal cutting, advanced stainless steel, and special alloys as well as products for industrial heating. The Sandvik Group also provides products and services for the mining and construction sectors to customers throughout Africa. In South Africa, the Sandvik Group (through the different entities it controls) provides rock processing products, including horizontal screens, grizzly feeders, and pan feeders to mining customers and inclined screens, grizzly feeders and pan feeders to quarry customers.
[4] Kwatani Global, is a newly established company incorporated in accordance with the laws of the Republic of South Africa and is controlled by an individual, [….] Subsequent to a number of internal steps resulting from the proposed transaction, Kwatani Global will control Kwatani (Pty) Ltd, Kwatani Holdings (Pty) Ltd and Mine and Quarry Supplies (Pty) Ltd. [….] Kwatani Global and all the firms controlled by it will be referred to as the "Kwatani
Group".
[5] The Kwatani Group is an original equipment manufacturer of custom-engineered vibrating equipment including screens and feeders to both local and international customers operating in the heavy and precious metals and minerals sectors. The Kwatani Group exports products from South Africa to many other African countries. In South Africa, the Kwatani Group supplies multislope screens, horizontal screens, inclined screens, grizzly screens, other screens, pan feeders, electromagnetic feeders, and other feeders to mining customers. The Kwatani Group also provides horizontal screens to quarry customers.
Proposed transaction
[6] The proposed transaction [….] will ultimately result in Sandvik SRP acquiring [….] in Kwatani Global from the seller, [….] Upon implementation of the proposed transaction, Kwatani
Global will be solely controlled by Sandvik SRP.
Competition assessment
[7] The Competition Commission (“Commission”) considered the activities of the merger parties and identified horizontal overlaps in respect of the supply of (i) horizontal screens to mining
customers; and (ii) pan feeders to mining customers.
[8] The Commission found that the merging parties will have combined
national market shares of 10-20% in the supply of (i) horizontal screens; and (ii) pan feeders and that the Sandvik Group is a small player in these markets. Furthermore, the merging parties will continue to face competition from several other players active in these markets in South Africa, such as Vibramech, Metso (Outotec), Osborn Engineering and Schenck Process.
[9] Customers and competitors raised no concerns regarding the effects of the proposed transaction on competition.
[10] The Commission concluded that the merger is unlikely to substantially prevent or lessen competition in the abovementioned markets. We have no reason to disagree with this conclusion.
Public interest
[11] Regarding potential employment effects, the merger parties submitted that the proposed transaction will not have a negative effect on employment.
[12] We note that [….] employees have been retrenched within the Sandvik Group (but not at the primary acquiring firm) in South Africa in the 12 months prior to the proposed transaction. The Commission investigated this and found no evidence suggesting that the retrenchments are merger specific or in anticipation of the merger. Twelve of these retrenchments were at the Sandvik Drilling Consumable Division [….] This is also evidenced by the fact that these retrenched employees were later re-employed [….]
[13] Regarding the spread of ownership, as mentioned Sandvik SRP is a newly incorporated company established for the purposes of the proposed merger. Sandvik Holdings and Sandvik AB, the firms controlling Sandvik SRP, do not have any shareholding by historically disadvantaged persons (“HDPs”, also referred to as “BEE shareholding”).
[14] The Commission, after assessing the pre-merger BEE shareholding, found that the proposed transaction results in a reduction in ownership by HDPs in the target firms [….]
[15] The Commission therefore recommended the approval of the proposed transaction subject to the condition that Sandvik Holdings SA ensure that [….] from the implementation date of the transaction, a shareholding of at least [….] share in Sandvik SRP (the primary acquiring firm) will be transferred, on mutually acceptable commercial terms, to one or more B-BEEE shareholder/s. We have approved the proposed transaction subject to this condition.
[16] The proposed transaction raises no other public interest concerns.
Conclusion
[17] The proposed transaction raises no competition concerns. We have approved the proposed transaction subject to the abovementioned condition relating to the spread of ownership.
29 October 2021
Mr Andreas Wessels
Date
Mr Enver Daniels and Dr Thando Vilakazi concurring
Tribunal Case Manager: Junior Khumalo
For the Merger Parties:
Marianne Wagener of Norton Rose Fulbright
For the Commission:
Yolanda Okharedia and Themba Mahlangu
[1] Sandvik Holdings Southern Africa (Pty) Ltd; Sandvik (Pty) Ltd; Sandvik Mining RSA (Pty) Ltd; Seco Tools South Africa; Sandvik
Financial Services (Pty) Ltd; and South Africa Newtrax (Pty) Ltd.
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