Nestle S.A. (Nestle And R and R Ice Cream Public Limited Company

The judgment

The court's own file

we competitiontrouns COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: LM026May16 In the matter between: Nestlé S.A. Primary Acquiring Firm and R&R Ice Cream Public Limited Company Primary Target Firm Panel : Norman Manoim (Presiding Member) : Medi Mokuena (Tribunal Member) : Andiswa Ndoni (Tribunal Member) Heard on £20 July 2016 Order Issued on 220 July 2016 Reasons Issued on 212 August 2016 Reasons for Decision Approval

[1]On 20 July 2016, the Competition Tribunal (“Tribunal”) approved the large merger between Nestlé S.A and R&R Ice Cream Public Limited Company.

[2]The reasons for approving the proposed transaction follow. Parties to the transaction Primary acquiring firm

[3]The primary acquiring firm is Nestlé S.A (“Nestlé”), a public company incorporated in accordance with the laws of Switzerland. Nestlé is not controlled by any entity and its shares are traded on the Swiss Stock Exchange.

[4]In South Africa, Nestlé wholly controls Nestlé South Africa Proprietary Limited (“Nestlé South Africa") and Galderma Laboratories South Africa Proprietary Limited (’Galderma”).

[5]Nestlé South Africa manufactures, supplies and distributes a wide range of food and beverage products and is also active in non-human food activities such as pet food and skin health products.

[6]Galderma focuses on skin health by delivering medical and non-medical solutions for the skin, Primary target firm(s)

[7]The primary target firm is R&R Ice Cream Public Limited Company ("R&R"), a company incorporated under the laws of the United Kingdom,

[8]R&Ris controlled by PAI Europe V (‘Fund V").

[9]R&R only recently entered the South African ice cream market through its acquisition of Nestlé’s entire South African ice cream business, which became R&R SA. R&R SA manufactures, supplies and distributes a diverse range of ice cream throughout South Africa under a number of brands including Country Fresh, King Cone and Jive. Proposed transaction and rationale

[10]The proposed transaction forms part of a worldwide transaction whereby Nestlé and Fund V will establish JVCo, which will be an incorporated joint venture, in which Nestlé and Fund V will contribute amongst other things certain assets and rights.

[11]Postransaction, Nestlé and Fund V will each hold an equal number of shares (with equal voting rights) in JVCo. In South Africa, the effect of the proposed transaction will be Nestlé re-acquiring control of R&R SA through JVCo.

[12]The merger parties submit that the proposed transaction will enable the integrated business to deliver long-term sustainable and profitable growth. Furthermore combining the capabilities of the two companies will position the merged entity to 2 compete more vigorously in new and existing markets, and will allow for substantial efficiencies and cost related savings. Impact on competition

[13]The Commission found that the proposed transaction results in a horizontal overlap in the manufacture and supply of ice cream. However, given that there was no geographic overlap, as a result of Nestlé South Africa not being active in the South African market, the Commission was of the view that the proposed transaction was unlikely to substantially prevent or lessen competition in any relevant market.

[14]The Commission noted that Nestlé and Fund V have agreed to a non-compete obligation in relation to the JVCo. In terms of this restraint, this requires that Nestlé and Fund V shall not engage in activities that compete with the JVCo's business. Given that the restraint is only limited to the activities that compete with the joint venture and is only limited to a certain period, the Commission was of the view that the restraint is reasonable and commercially justifiable.

[15]Taken as a whole the Commission was therefore of the view that the proposed transaction was unlikely to substantially prevent or lessen competition in any relevant market. [16 ] We concur with the Commission's conclusion that the proposed transaction is unlikely to substantially prevent or lessen competition in any relevant market. Public interest

[17]The merging parties submit that there will be no negative effect on employment as no retrenchment of employees is contemplated as a result of the proposed transaction. Furthermore, given that Nestlé does not operate an ice cream business in South Africa, the proposed transaction will not give rise to a duplication of any job functions in R&R SA's manufacture, distribution and supply of ice creams in South Aftica. { 18] Given that there is no overlap between the activities of the merging parties, and that R&R SA will continue to operate independently of Nestlé's South African business, the Commission was of the view that the proposed transaction was unlikelyto have a negative impact on employment. [ 19] The proposed transaction further raised no other public interest concems. Conclusion

[20]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 12 August 2016 DATE Ms Médi Mokuena and Ms Andiswa Ndoni concurring ‘Tribunal Researcher: Karissa Moothoo Padayachie For the merging parties: Webber Wentzel For the Commission: Nolubabalo Myoli and Xolela Nokele