VKB AGRI And VKB Flour Mills

The judgment

The court's own file

1 COMPETITION TRIBUNAL OF SOUTH AFRICA Case No: LM041May18 In the matter between VKB Agri Processors (Pty) Ltd Primary Acquiring Firm And VKB Flour Mills (Pty) Ltd Primary Target Firm Approval

[1]On 13 June 2018, the Competition Tribunal (“the Tribunal”) unconditionally approved the large merger between VKB Agri (Pty) Ltd (“VKB Agri”) and VKB Flour Mills (Pty) Ltd (“VKB Flour”).

[2]The reasons for the approval follow. Panel : Ms Mondo Mazwai (Presiding Member) : Mrs Medi Mokuena(Tribunal Member) : Prof Fiona Tregenna (Tribunal Member) Heard on : 13 June 2018 Order Issued on : 13 June 2018 Reasons Issued on : 10 July 2018 REASONS FOR DECISION 2 Parties to the transaction and their activities Primary acquiring firm

[3]The primary acquiring firm is VKB Agri, currently the majority holder of VKB Flour.

[4]VKB Agri is a wholly owned subsidiary of VKB Bellegings (Edms) Bpk (Pty) Ltd (“VKB Bellegings”). VKB Bellegings is a widely held company and is thus not controlled by any single shareholder. VKB Bellegings, VKB Agri and all of their subsidiaries in South Africa are further referred to as the “VKB Group”. The VKB Group has a diverse range of interests in the agricultural sector, ranging from maize milling to research and development of seed technology. Primary target firm

[5]The primary target firm is VKB Flour, a manufacturer of wheat flour, bread and other bakery products. VKB Flour is majority owned by VKB Agri with Louis Dreyfus Commodities Africa (Pty) Ltd (“LDCA”) as a minority shareholder. Proposed transaction and rationale

[6]In terms of the proposed transaction, VKB Agri intends to acquire the remaining interest in VKB Flour from LDCA, becoming the sole owner and controller.

[7]LDCA wishes to dispose of its interest in VKB Flour as VKB Flour does not form part of its core business and LDCA does not lead the operations. Relevant market and impact on competition Horizontal assessment

[8]The Competition Commission (“The Commission”) evaluated the effect of the proposed transaction on the market for the manufacture and supply of wheat flour and bread products. The transaction does not change the structure of the relevant market as VKB Agri already holds a controlling majority interest in the target firm. The transaction simply removes LDCA’s minority protection rights, conferring unfettered sole control of VKB Flour onto VKB Agri. 3

[9]Furthermore, the Commission is of the view that the proposed transaction is pro-competitive as it removes structural links between VKB Agri and LDCA who are competitors in the maize milling market.

[10]We accordingly agree with the Commission’s analysis. Public interest

[11]The merging parties submitted that the proposed transaction will have no negative impact on employment, as the target firms will continue to operate as is post-merger. The employee representatives of VKB Flour, the Food and Allied Workers Union, were contacted by the Commission regarding the transaction and did not raise any concerns.

[12]The proposed transaction further raised no other public interest concerns. Conclusion

[13]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 out of the merger. Accordingly, we approve the proposed transaction unconditionally. 10 July 2018 Ms Mondo Mazwai Date Mrs Medi Mokuena and Prof Fiona Tregenna Tribunal Researcher: Jonathan Thomson For the merging parties Daryl Dingley of Webber Wentzel For the Commission: Tumiso Loate