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Diamond II Acquisition Corp and 3Com Corporation (120/LM/Nov07) [2008] ZACT 7 (22 January 2008)
.RTF of original document
COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 120/LM/Nov07
In the matter between:
Diamond II Acquisition Corp
Acquiring Firm
And
3Com Corporation
Target Firm
Panel
: D Lewis (Presiding Member), Y Carrim (Tribunal Member) and M Mokuena (Tribunal Member)
Heard On
: 19 December 2007
Decided on
: 19 December 2007
Reasons Issued on
: 22 January 2008
Reasons for Decision
Approval
[1]
On 19 December 2007 the Competition Tribunal issued a Merger Clearance Certificate approving the
merger between Diamond II Acquisition Corp and 3Com Corporation unconditionally. The reasons appear below.
Parties
[2]
The acquiring firm is Diamond II Acquisition Corp (“Diamond”) a company incorporated
in the State of Delaware, United States of America. Diamond is wholly owned by Diamond II Holdings LLC (“Diamond Holdings”)
a limited liability company organised under the laws of the State of Delaware. In turn Diamond Holdings is controlled by Bain Capital
Investors LLC (“Bain Capital”). Both Diamond Holdings and Diamond II are special purpose vehicles established for the
purposes of this transaction.
[3]
The target firm is 3Com Corporation (“3Com”), a corporation incorporated in the State
of Delaware. 3Com is a company listed in NASDAQ Global Select Market (“NASDAQ exchange”), thus it is not owned by any
firm. 3Com has a subsidiary H3C Technologies in South Africa.
Transaction
[4]
In terms of the proposed transaction Diamond proposes to acquire the majority of the issued share
capital of 3Com through the merger of Diamond 3Com. Post-merger, Diamond will have a majority shareholding of 83.5% in 3Com.
Rationale
[5]
Diamond, is a newly formed Delaware corporation with no prior operations and no assets. It was established
for the purpose of the proposed transaction and enabling its direct and indirect shareholders to acquire a controlling interest in
3Com. 3Com’s rationale for entering into the transaction is to enable its shareholders to realise a premium of their shares
of common stock based on the closing price of those shares on 27 September 2007.
Parties’ Activities
[6]
Diamond Holdings and Diamond are both special purpose vehicles established specifically for the
purpose of acquiring interest in 3Com. As a result these entities do not currently have any activities, or provide any products or
services. Bain Capital on the hand is a world wide fund management group that manages private equity, venture capital and hedge and
yields funds.
[7]
3Com is a global provider of enterprise and small business networking solutions that help organisations
achieve their businesses and networking requirements. It provides integrated, secure converged network solutions for businesses of
all types and sizes. These include wireless access products, standalone and stackable switches, powerful core switches, interoperability-tested
routers, standards-based convergence applications and internet protocol telephony.
Competition Analysis
[8]
There is no overlap in the activities of the merging parties as the acquiring firm is not involved
in the activities where the primary target firm is involved. An analysis of the vertical integration by the Commission revealed that
the proposed transaction will result in minimal vertical relationship between the merging firms in that 3Com purchases very small
quantities of products produced by FCI in other parts of the world. We agree with the Commission that this transaction is unlikely
to substantially prevent or lessen competition in any market in South Africa.
Public Interest Issues
[9].
There are no public interest issues.
Conclusion
[10]. Based on the above, we find that the transaction will not result in a substantial lessening or prevention of competition in
the identified markets and is accordingly approved unconditionally.
___________________
22 January 2008
Y Carrim
Date
Tribunal Member
D Lewis and M Mokuena concurring.
Tribunal Researcher
: J Ngobeni
For the merging parties
: Webber Wentzel Bowens
For the Commission
: David Masilela
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