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COMPETITION TRIBUNAL OF SOUTH AFRICA

Case No: LM047Jun15

In the matter between:

BRAIT MAURITIUS LIMITED                                                                            Acquiring Firm

And

DGB (PROPRIETARY)  LIMITED                                                               Primary Target Firm

Panel                                        : Norman Manoim (Presiding Member)

                                                        : Andiswa Ndoni (Tribunal Member)

                                                        : Yasmin Carrim (Tribunal Member)

Heard on                                   : 8 July 2015

Order Issued on                        : 8 July 2015

Reasons Issued on                   : 23 July 2015

Reasons for Decision

Approval

[1] On 8 July 2015, the Competition Tribunal ("Tribunal") unconditionally approved the merger between Brait Mauritius Limited ("Brait Mauritius") and DGB  (Proprietary) Limited ("DGB").

[2] The reasons for approving the proposed transaction follow.

Parties to Transaction and their Activities:

Primary acquiring firm

[3] The  primary acquiring firm is Brait Mauritius, a company incorporated  in Mauritius. Brait Mauritius is ultimately controlled by Brait S.E., a public company incorporated in Malta.[1] The shareholders holding more than 5% of the ordinary issued shares in Brait

S.E are Christoffel Hendrik Wiese (34.6%) and The Government Employee Pension Fund (9.8%). In addition to Brait Mauritius, Brait S.E controls a number of other firms. Relevant to the proposed transaction is its interest in Consol Holdings Limited ("Consol'').[2] Brait Mauritius controls a number of firms. Of relevance is its 40.84% shareholding in DGB, the primary target firm in the present transaction.

[4] The Brait Group is an international investment group that  invests  predominantly in privately owned companies. It has interests in a variety of sectors. The activities of Consol are relevant to the proposed transaction. Consol is a glass packaging manufacturer in Southern Africa. It manufactures and supplies glass packaging solutions for a number of industries including beverages (alcoholic  and  non­ alcoholic).

Primary target firm

[5] The primary target firm is DGB, a company incorporated in accordance with the laws of the Republic of South Africa. DGB is jointly controlled by the following firms: Brait Mauritius (40.84%), the Cherub Staff Trust ("Cherub") (12.26%), Kangra Group (Ply} Ltd ("Kangra") (20.42%) and Pentus Nominees {Ply} Ltd ("Pentus") (26.48%). DGB controls a number of firms in South Africa.[3]

[6] DGB is a producer, wholesaler and distributor of wine, spirits and other alcoholic and non-alcoholic beverages. It is also the South African agent and distributor of international spirit and other beverage brands.

Proposed Transaction and rationale:

[7] In terms of the proposed transaction, Brait  Mauritius  intends to  acquire  a further 20.42% of DGB's shares from Kangra. Post-merger, DGB's shareholding will be as follows: Brait Mauritius (61.26%), Cherub (12.26%) and Pentus (26.48%).

[8] Brait Mauritius submits that its investment portfolio is growing. Thus, it seeks to increase its interest in DGB and grow the business to a scale that justifies the continued investment therein. Kangra submits that the proposed transaction will enable it to liquidate its shareholding in DGB at an attractive price.

Impact on competition:

[9] The Competition Commission ("Commission") found that there  are  no  horizontal overlaps between the activities of the merging parties as none of the firms within the Brait Group are active in the production and supply of wine and spirits and as such do not compete with DGB.

[10] The Commission however found that a vertical relationship exists as Consol currently supplies DGB with wine and spirit bottle packaging. The Commission accordingly considered whether this relationship raised any foreclosure concerns.

[11] In relation to wine bottle packaging, the Commission found that Consol  currently supplies 90% of DGB's packaging requirements, a position that is unlikely to change post-merger.[4] Further, DGB accounts for a mere 5% of Consol's annual sales of wine bottles and overall has less than 10% of the total market share for the production and supply of wine in South Africa. In addition, there are other firms such as Distel! Group Limited ("Distell"), Robertson Winery (Pty) Ltd ("Robertson"), KWV South Africa (Ply) Ltd ("KWV') and Diageo Pie ("Diageo") that will procure wine bottle packaging from Consol's competitors should the merged entity adopt a customer foreclosure strategy post-merger.

[12] The Commission found that Consol also supplies 90% of DGB's spirit bottle packaging.[5]   Further,  DGB  accounts  for  approximately  3.69%  of  Consol's  annual sales of spirit bottles and less than 10% of the total market share of the production and supply of spirit bottles. Further, there are numerous other firms such as Diageo, KWV, Distill and others that will continue to procure spirit bottle packaging from Consol's competitors post-merger. Thus, the Commission found that foreclosure was unlikely.

[13] On such basis, the Commission concluded that the proposed transaction  is unlikely to substantially lessen or prevent competition in any market in South Africa.

Public interest:

[14] The proposed transaction raises no other public interest concerns.

Conclusion:

[16] 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 transactions. Accordingly we approve the proposed transaction unconditionally.

23 July 2015

DATE

_______________________

Norman Manoim

Yasmin Carrim and Andiswa Ndoni concurring

Tribunal Researcher:              Ammara Cachalia

For the merging parties:         Hendrik Krog and Andrew Cadman, Read Hope Philips Thomas  &  Cadman

For the Commission:               Reabetswe Molotsi and Xolela Nokele

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