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Stocks Building Africa (Pty) Ltd v Housing Africa Development (Pty) Ltd (19/LM/Feb08) [2008] ZACT 24 (16 April 2008)
.RTF of original document
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case NO: 19/LM/Feb08
In the matter between
Stocks Building Africa (Pty) Ltd
Primary Acquiring firm
And
Housing Africa Development (Pty) Ltd
Primary Target Firm
Panel
: Y Carrim (Tribunal Member); M Mokuena (Tribunal Member) and U Bhoola (Tribunal Member)
Heard on
: 09 April 2008
Decided on
: 09 April 2008
Reasons Issued
: 16 April 2008
Reasons for Decision
Approval
[1]
On 09 April 2008 the Competition Tribunal issued a Merger Clearance Certificate approving the merger
between Stocks Building Africa (Pty) Ltd and Housing Africa Development (Pty) Ltd unconditionally. The reasons appear below.
Parties
[2]
The primary acquiring firm is Stocks Building Africa (Pty) Ltd (“Stocks”). Stocks is
jointly controlled by RMB Venture Two (Pty) Ltd (“RMB Venture”), Leswikering Building (Pty) Ltd (“Leswikering”)
and Management Consortium (“Management”).
[3]
The primary target firm is Housing Africa Development (Pty) Ltd (“Housing Africa”). Housing Africa is not controlled by any firm. Its major shareholders are Louis Christoffel de Jager with 35%, Willem Ernest du Toit
with 35% and Housing Employees Share Trust with 17% shareholding.
Transaction
[4]
Stocks intends to acquire the entire issued share capital of Housing Africa. Post merger, Stocks will become the sole shareholder of Housing Africa.
Rationale
[5]
Stocks is in the process of expanding its operations into the wider construction industry and is
of the view that expanding into the market segment serviced by Housing Africa will add momentum to its vision of becoming a major
player in the South African construction industry.
[6]
For Housing Africa, the proposed transaction represents an opportunity for its main shareholders
to realise their investment.
Parties’ Activities
[7]
Stocks is a building company specialising in general construction works, residential buildings and
non-residential buildings. Stocks’ activities are mostly concentrated in the commercial and industrial fields, including leisure
developments, shopping centres, airports, public private partnerships and institutional buildings. Leswikering is an investment company
and does not have an interest in any entity conducting business similar to Housing Africa. First Rand, the parent company of RMB
Venture, is involved in the financial services industry.
[8]
Housing Africa is involved in the building of residential housing units which range from R750 000
to R3 million. Housing Africa’s operations are focused on the development of low cost housing, bondage housing, sectional title
cluster developments and tender work for residential construction.
Relevant Market
[9]
In defining the relevant market, the Commission stated that although housing construction can be regarded
as a distinct product market from the rest of the building construction market, it is not essential to settle on the precise definition
of the relevant market. This view is informed by the fact that Housing Africa, unlike Stocks, is not involved in the general construction
market other than residential construction.
The Commission also relied on interviews held with major construction companies which suggested that residential housing construction
is driven by different market forces and approaches from general building construction and as such cannot be included in the same
product market. At the hearing the merging parties submitted that even if the Tribunal were to define the relevant market as the residential construction
market, they were active in different segments of that market. Stocks is involved in large high rise construction such as the Michaelangelo
in Sandton. Housing Africa did not construct any buildings above three floors and did not construct buildings in concrete frame structures.
The geographic market in which the parties’ activities overlap is in respect of Gauteng. However, the Commission’s investigation
with customers of the merging parties revealed that there are no barriers to utilising construction companies located elsewhere in
the country. The Commission therefore assessed the effects of the proposed transaction on both the national market as well as in
Gauteng.
Competition Analysis
[10]
For purposes of this transaction we will only consider the effect thereof in the market for residential
construction as it is the only area in which the parties’ activities overlap. Housing Africa’s market share is estimated
to be between 1% and 3% in Gauteng and less than 1% nationally. Stocks’ market share is estimated to be less than 1% both nationally and in Gauteng. The combined national market share of
the two entities post merger would not be more than 2%. There are other firms from whom merging parties will face competition such
as Cosmopolitan Projects, RBA Holdings SEAkay and M&T Developments.
[11]
Based on the above the transaction will not result in substantially lessening or preventing competition
in the market for residential construction.
Public interest
[12]
The transaction does not give rise to any public interest issues.
_______________
16 April 2008
Y Carrim
Date
Tribunal Member
Concurring: M Mokuena and U Bhoola
Tribunal Researcher
: I Selaledi
For the merging parties
: Cliffe Dekker Inc
For the Commission
: Mfundo Ngobese (Mergers
and Acquisitions)
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