Super Group Greystone

The judgment

The court's own file

COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: 018333 in the matter between: SUPER GROUP TRADING (PTY) LTD Primary Acquiring Firm And GREYSTONE TRADING 6 CC Primary Target Firm Panel : T Madima (Presiding Member) : A Roskam (Tribunal Member) : | Valodia (Tribunal Member) Heard on : 26 February 2014 Order Issued on : 26 February 2014 Reasons Issued on : 26 March 2014 Reasons for Decision

[1]On 26 February 2014, the Competition Tribunal unconditionally approved the acquisition by Super Group Holdings (Pty) Ltd of Greystone Trading 6 CC asa going concern. {2] The reasons for approving the proposed transaction follow. Parties to transaction Primary acquiring firm

[3]The primary acquiring firm is Super Group Trading (Pty) Ltd (“SGT”). SGT is a wholly owned subsidiary of Super Group Holdings (Pty) Ltd (“Super Group Holdings”). Super Group Holdings is ultimately controlled by Super Group Limited, a company listed on the Johannesburg Securities Exchange Limited (‘Super Group”). Super Group’s top five shareholders are: Allan Gray Public investment Corporation! Visio/Mazi Capital (Hedge funds) PSG Online Securities Broking Investec Asset Management

[4]Super Group controls the following firms: Bluefin Investments Limited Emerald Insurance Company Limited Fleet Africa (Pty) Ltd

[5]SGT directly controls the following firms: Super Group Africa Chataprop Holdings 98 (Pty) Lid Lexshell 280 Investments (Pty) Ltd Micor Freight (Pty) Ltd Rentrack (Pty) Lid

[6]Super Group is a supply chain management business. Of relevance to the proposed transaction is the business activities of Super Group Convenience PIC also has interests in Barloworld SA, Imperial Holdings, Bidvest (McCarthy), Combined Motor Holdings and Unitrans Automotive. (‘SG Convenience’), a division operated under SGT. SG Convenience offers a centralised warehouse and distribution centre for all trading formats below formal retail (low-end retail).2 SG Convenience also purchases liquor from integrated distributors or independent liquor distributors and redistributes it to certain low end retailers. Primary target firm

[8]The primary target firm is Greystone Trading 6 CC trading as Restaurant and Hotel Liquor Distributors (“R&H”). R&H is jointly controlled by Amaro Fernades and Alda Mario Fernades.

[9]R&H distributes liquor to low-end retailers such as hotels, restaurants and smail liquor outlets situated in Cape Town and the surrounding areas. R&H distributes liquor to low-end retailers in the Western Cape region. Proposed Transaction

[10]In terms of the Sale of Business Agreement between Super Group Trading and Greystone Trading 6 CC, it is agreed that SGT will acquire the business of R&H as a going concern. Rationale

[11]SGT wishes to expand its presence within the market for the distribution of liquor to hotels and restaurants in the Western Cape region and as such would like to acquire the business of R&H as a going concern.

[12]R&H Close Corporation members wish to realise their investment. by selling the business as a going concern to SGT. ? Low-end retailers are small independent firms that have fragmented buying patterns who are occasionally unable to meet the minimum order quantities required by the manufacturers for direct delivery, whereas high-end retailers are large integrated firms with their own distribution network and typically buy directly from the manufacturer through the manufacturer’s distribution channels. Relevant Market and Impact on Competition

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[16]There is a horizontal overlap between the activities of the merging parties in respect of the distribution of liquor to low-end retailers in the Western Cape area. We identified, in line with a previous decision in this regard,* a separate market for the wholesale and retail of liquor. We further identified a narrow market for the redistributionAwholesaling of liquor to low end retailers, as well as a broader market of distribution of liquor to retailers in-general. Thus the relevant market for the purpose of assessing the proposed transaction is the redistribution/wholesaling of liquor to small independent Aow-end retailers in the Western Cape area, which represents the narrowest market in which competition concerns are likely to arise. The estimated market shares of R&H and SGT in the relevant market are 3% and 1% respectively. The merged entity will have an estimated combined market share of 4% with an accretion of 3%. We are of the view that the merged entities’ market share is low and unlikely to raise any competition concerns. Furthermore, there are a number of viable competitors such as Makro/Masscash, Ultra liquor, Diamond Discount Liquor and Liquor Runners who also supply low-end retailers. Customers therefore have the option of purchasing directly from the integrated, appointed or independent distributors, thus further exerting a constraining influence upon the merged entity post-merger. Conclusion 3 This geographic market comprises a radius of approximately 500km from Cape Town. In this regard see pages 11-12 of the Commission’s Report. * See Massmart Holdings (Pty) Ltd and Picardi Liquors (Pty) Ltd Case Number 47/LM/Aug01. (11] in the circumstances of the above we conclude that the proposed transaction is unlikely to substantially prevent or lessen competition in the market for the redistribution/ wholesaling of liquor to low end retailers. In addition, no public interest issues arise from the proposed transactions. Accordingly we approve the proposed transactions unconditionally. \ 26 March 2014 Takalani Madima DATE Anton Roskam and Imraan Valodia concurring Tribunal Researcher: Moleboheng Moleko For Merging Parties : Bianca Ellisa and Andile Nikani - Fluxmans Attorneys For the Commission: Nompucuko Nontombana