Business Venture Investments No 1347 (Pt

The judgment

The court's own file

1 COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: 63/LM/OCT10 In the matter between: Business Venture Investments No 1347 (Pty) Ltd Acquiring Firm And DD’s Cash and Carry (Pty) Ltd Target Firm Panel : Norman Manoim (Presiding Member) Yasmin Carrim (Tribunal Member) Andreas Wessels (Tribunal Member) Heard on : 13 October 2010 Order issued on : 13 October 2010 Reasons issued on : 17 November 2010 Reasons for Decision Approval

[1]On 13 October 2010, the Competition Tribunal (“Tribunal”) unconditionally approved the acquisition of DD’s Cash and Carry (Pty) Ltd by Business Venture Investments No 1347 (Pty) Ltd. The reasons for approving the transaction follow. The parties and their activities

[2]The primary acquiring firm is Business Venture Investments No 1347 (Pty) Ltd (“Newco”) a subsidiary of Masscash (Pty) Ltd (“Masscash”), a 2 company part of the Massmart Group, Massmart Holdings Limited (“Massmart”).

[3]Newco is a shelf company and has not previously traded. Massmart trades through various companies that fall under its four divisions namely Massdiscounters 1 , Masswarehouse 2 , Massbuild 3 and Masscash 4 .

[4]The primary target firm is DD’s Cash and Carry (Pty) Ltd trading as JD’s Cash and Carry (Pty) Ltd (“JD’s”). JD’s conducts business as a retailer and wholesaler of grocery products to customers in the LSM 2 to 6 market through its store located in Vosloorus, Gauteng. In this store, JD’s has a butchery, bakery, take-away counter and sale of fresh produce and other perishables. The proposed transaction

[5]Masscash, through its subsidiary Newco, is to acquire a 51% interest in JD’s. The existing shareholders of JD’s will retain 49% of the interest in the business. Minority protections are afforded to these shareholders. Rationale for the proposed transaction

[6]Massmart through Masscash wants to expand its presence in the retail grocery segment. More particularly to grow its mass-market in the urban and peri-urban areas where large incumbents are consolidating their respective market shares, and where Massmart currently has no presence. Masscash’s food retail hybrid strategy is intended to provide a combined retail/wholesale format that will cater for the needs of LSM 2-6 customers and small independent trades. 1 Comprises of the Game stores, which offers merchandise and non perishable groceries to end consumers in 5-10 socio-economic groups. Dion Wired which offers a more upmarket range of mainly electrical and electronic merchandise to the upper end consumer. 2 Comprises of Makro which trades in range of food, liquor and general merchandise to commercially affiliated sellers and upper income end consumers in the 6-10 socio economic groups. 3 Builders Warehouse, Builders Express and Builders Trade Depot which sell hardware and home improvement products and building materials. 4 Comprises of Jumbo Cash and Carry which distributes cosmetic, toiletries and hair products for sale to lower to middle income urban customer. Also comprises of CBW which trades in basic grocery products and limited range of general merchandise . In this list there is also Shield which is as voluntary buying group serving independently owned food wholesale and retail outlet servicing customers in the LSM 2-6 socio-economic groups. 3

[7]The rationale for this transaction for the target firm, is that Spirydon Yiannopoulus, a trustee and beneficiary in the SY Trust that currently owns 50% interest in JD’s, wants to realise his interest. Further, it is expected that Massmart, as a result of this transaction, will bring additional resources which will allow JD’s business to expand. Relevant markets and impact on competition Horizontal analysis

[8]There is a horizontal overlap in respect of wholesale trade in grocery products to the customers in the LSM 2-6 socio-economic groups in the Gauteng province. The geographic overlap occurs with the acquiring firm’s nearest wholesale store being the Springs Cash and Carry. However, it was found that this market has the presence of sufficient effective competitors 5 to curb any anti competitive behaviour by the merged entity. Vertical analysis

[9]Additionally, there exists a vertical relationship between the merging parties. This is because JD’s has previously made ad hoc purchases from the primary acquiring firm. The figures concerning such purchases are however too insignificant to raise any foreclosure concerns or issues.

[10]The customers of the merging parties were contacted and indicated no objection to the merger provided that the merger does not change the present buying conditions situating to the worst. Public interest

[11]No public interest concerns arise as a result of this proposed transaction. 5 Such as Shoprite, Spar, OK, Pick ‘n Pay and Boxer. 4 Conclusion

[12]The proposed transaction is approved without conditions since it is unlikely to substantially prevent or lessen competition in any potential relevant market. ____________________ 17 November 2010 Norman Manoim DATE Yasmin Carrim and Andreas Wessels concurring Tribunal Researcher : Mahashane Shabangu For the merging parties : Chris Charter and Pia Harvey from Cliffe Dekker Hofmeyr For the Commission : Mogalane Matsimela of the Mergers and Acquisitions Division