Proudafrique S Buys

The judgment

The court's own file

competitiontribunal south africa _— fax form to Shaun Read/ Andrew Cadman fax Read Hope Phillips Attorneys 011 344 7850 Legal Services 44283 Competition Commission ref 06/LM/|Jan11 date 12 April 2011 from Tebogo Mpuitle pages 5 (including this page) re Reasons This message is intended only for the use of the addressee and may contain information that is privileged and confidential. If you are not the intended recipient, you are hereby notified that any dissemination of this communication is strictly prohibited. If you have received this communication in error, please notify us immediately by telephone. Attached please find the Tribunal’s reasons for the decision in the above matter. Regards Gut Tebogo Mputle CC: Maarten van Hoven - 44295 3" Floor, Mulayo, the diti Campus, 77 Meintjies Street, Sunnyside, Pretoria & Private Bag X24, Sunnyside 0132 Tel: +27 (12) 3943300 Fax: +27 (12) 3940169 Email: ctsa@comptrib.co.zza Website: http:/Avww.comptrib.co.za GF competiiontibunal fark afeeee COMPETITION TRIBUNAL OF SOUTH AFRICA Case No:06/LM/Jan11 In the matter between: PROUDAFRIQ TRADING 267 (PTY) LTD Acquiring Firm And S BUYS (PTY) LTD Target Firm Panel : Norman Manoim (Presiding Member), Yasmin Carrim (Tribunal Member) Merle Holden (Tribunal Member) Heard on : 30 March 2011 Order issued on : 30 March 2011 Reasons issued on : 12 April 2011 Reasons for Decision Approval

[1]On 30 March 2011 the Competition Tribunal (‘Tribunal’) approved the large merger between Proudafrique Trading 267 (Pty) Ltd (“Proudafrique”) and S Buys (Pty) Ltd (‘Buys’). The Tribunal’s reasons for approving the transaction are set out below. The Parties to the transaction

[2]The primary acquiring firm is Proudafrique an newly formed wholly owned subsidiary of RTT Group (Pty) Ltd (“RTT”), ‘a company incorporated in terms of * http:/Awww rtt.co.za 1 the laws of the Republic. RTT is ultimately controlled by First Rand Bank Limited and Actis Logistics Limited.

[3]Buys’, the target firm is controlled by Sicily Van Rensburg and the S Buys Trust. The S Buys Group provides management, product distribution and education directly to the consumer, healthcare professionals and to corporate clients.

[4]In terms of the proposed merger, Proudafrique intends to acquire the entire issued share capital in Buys and all claims which the sellers may have against Buys. The activities of the parties

[5]The Acquiring Group: a.The controllers of RTT: (i) FirstRand Group* is one of the largest financial institutions in South Africa, (ii) the Actis Group* is a private equity investor in emerging markets in Asia, Latin America and Africa. The Actis Group’s South African investments include Alexander Forbes, Fuel, Peters Papers and Platmin. RTT, which promotes itself as the largest and most successful privately owned distribution company, provides various logistics services to a variety of industries, through its various divisions. SOSPharm is the division which trades as the Pharmaceutical Healthcare Distributors division and is relevant to this transaction. Through this division, RTT distributes pharmaceutical products on behalf of 30 manufacturers in South Africa. RTT distributes to medical practitioners, hospitals, clinics, the state, pharmacies, health shops, wholesalers and retailers in Gauteng, Western Cape, KwaZulu-Natal and Eastern Cape.

[6]The Target Firm: a.Buys is involved in the retail supply of pharmaceutical through its 10 pharmacies in Gauteng, Mpumalanga and North West Province. The Buy Group also has subsidiaries in property, training and development and purchasing in pharmaceutical products.

[7]The parties are in a horizontal and a vertical relationship in that they are both in distribution and wholesale of pharmaceutical products. Further Buys operates in the downstream retail market and RTT, through PHD, operates in the upstream market of the distribution of pharmaceutical products. http://www.sbuys.co.za 5 http://www.firstrand.co.za/live/index.php 4 2 http://www.act,is/ The Rationale

[8]RTT submits that the rationale behind the transaction is a strategic integration which will provide it with the backbone of the courier pharmacy business in Carltonville and surrounding areas.

[9]The parties further submit that their proposed merger will result in pro-competitive gains in that it will enhance their joint ability to effectively compete with other significant competitors in the market. The relevant market and the impact on competition

[10]The parties define the relevant markets in which they operate as follows: a. The wholesale supply of pharmaceutical products, being the market where the parties compete, and b. The retail supply of pharmaceutical products, this being the market in which Buys’ retail outlets compete.

[11]The Commission views the pharmaceuticals sector as being characterized by a small number of manufacturers and a large number of retail outlets and this leaves the manufacturers with the task of having to distribute their products to the retailer. This then leads to wholesaler / distributor being able to act as an intermediary between the manufacturer and the retailer.

[12]In the Commission’s view, the parties are in a vertical and horizontal relationship. Both parties are active in distribution and wholesale of pharmaceutical products. While Buys is active in the downstream retail market through its pharmacies, RTT targets corporate pharmacies and also acts as a distributing agent for a number of principals who sell a variety of pharmaceutical products to wholesalers, including Buys.

[13]In the market for the wholesale distribution of pharmaceutical products, which comprises of approximately 13 participants, the acquiring firm is ranked 4" while the target firm is ranked at about 11" in size. There are therefore a number of significant competitors in this market.

[14]It is better to define the wholesale market as a distribution market. Wholesalers may compete in a distribution market but so may other firms which have different business models to traditional wholesaling. It is however relevant to consider the distribution market from a competition market because although the retail price of pharmaceuticals in regulated we were advised that at present the distribution price is not. For this reason we consider the implications of the merger on the distribution market.

[15]Although there is an overlap in respect of distribution this is unlikely to raise competition concerns as the distribution models of the firms are very different. The target firm operates from Carltonville and its major customers are primarily located in the North West province and comprise mostly of independent pharmacies in smaller towns. The acquiring firm’s major customers, however, consist of the larger corporate pharmacies across the country. This then adds credibility to RTT’s contention that the services offered by Buys will complement those offered by RTT and enable the merged entity to compete more effectively with the its larger competitors. Public Interest

[16]The transaction will have no negative effect on employment and no other public interest issues arise.

[17]The third parties contacted raised no concerns over the merger. CONCLUSION

[18]The Tribunal has considered the above merger and analysed the impact it is likely to have on competition in the national market for the wholesale distribution of scheduled and unscheduled pharmaceutical products. The market has relatively low barriers to entry and vertical integration by various firms has previously taken place. The market is further contested by various large distributors and the parties will hold a combined market share of approximately 41%.

[19]Accordingly, the merger is approved without conditions. N “re DATE YCa 12 April 2011 rim and M Holden concurring. Tribunal Researcher: Songezo Ralarala For the merging parties: Shaun Read and Andrew Cadman from Read Hope Phillips Attorneys, For the Commission: Martin Van Hoven File No. Mode 7210 Memory IX David Memory Storage Report ( 12. Apr. 2014 11:52.) « Destination 00113447850 competitiontribunal semek africa fax form fo - Shaun Readf Andrew Cadman fax . Read Hope Phillips Attomeys 011°344 7850 Legal Services 44283 Competition Commission. ref O6/LEA|Jan41 date 12 Aprif 2014 from Tebogo Mpulle pages 5 {including this page) re Reasons “This mesnage is intended only forthe use of the adklrassee and thay contain information thatis and confi IF you are nat tha reolplent, you are hereby nolilied that ‘any dissemination of this oor Is strictly prohibited. Ifyou have this ‘pammunicationin error, plesse natty us immediately by telephone. Attached please find the Tribunal's redsonsfor the decision in the above matter. Regards Tebogo Mputle CC: Mearten van Hoven - 44295 2" Floor, Mulayo, the chi Campus, 77 Meinifies Streef, Sunnyside, Pretoria Ea Private Bau X24, Sunnyside0192 Felt 427 (12) 3943300 Fax: +27 (12) 3840169 Enail: Webelle; tip: x kK OX Date/Time: 12. Ape. 2041 11:52 Destination 7210 Memory TX David 0113447850 Communication Result Report ( 12.Apr. 2011 12:05) x x & 1) 2) Page Not Sent Reason for error E 4 Hang up or line fail E.2) Busy : o answer E. 4) N i i £.5) Exceeded max. E-mail size ) No facsimile connection ecompetitiontibunal Feutk africa 4 fo : Shaun Readf Andrew Cadman fax . Read Hope Phillips Attomeys 0117344 7850 Legal Services 44283 Competition Commission ref O6/LM/\Jan11 date 12 April 2014 from Tebogo Mputle pages 5 (including this page) re Reasons “This message Is intended only far the use of the addressee and may contain inforrmation that bs prhileged and " i ‘any disseminationof this comm IFyou are not theé yt, you are hereby notified that is strictly you have this ‘communication in eiros, pleasa notify us immestiatalyby telephone Attached please find the Tribunals recisons for thedecision in the above matter. Regards ‘Tebogo Mputle (CG: Maarten van Hoven - 44295 3 oor,Mutayo,tha diCampus, 77 Meinfies Sirect, 3900 Fen +27 (12}.294 0408 Email: Tek 427 (125 side, Pretoria 1a Privale Bag x24, Sunnyside 0132 it LporTphth,cO28a Webeile: hie