Thread by @MaanoMadima

Cashbuild had proposed to acquire 100% of the issued share capital of The Building Company (TBC) for R1,074,700,000.

In May, the Commission recommended that the proposed
transaction be prohibited.

Why was it prohibited? Who/What is TBC?

The Building Company (TBC) is the building material division of Pepkor, with over 180 stores and sites throughout Southern Africa.

Some of their well known brands are; Timbercity and BUCO Western Cape.

Why was Cashbuild interested in TBC?

TBC would've enabled Cashbuild to expand geographically and incremental access to additional segments of the market.

Cashbuild Group operates branded stores as well as P&L Hardware- branded stores.

The Cashbuild Group operates 318 stores in Africa (256 Cashbuild stores, 61 P&L Hardware stores, and 1 DIY store).

In South Africa, the Cashbuild Group has 228 stores.

The Commission considered the activities of the merging parties and found that the proposed merger raises a horizontal as well as a vertical overlap.

The horizontal overlap arises in relation to the market for the retailing of building materials, hardware and related products

The vertical overlap arises in that The Building Company Group, through MacNeil and Cachet, is active in the wholesale supply of building material and hardware products to retailers including Cashbuild.

No need for VAR here.

The Commission found that the proposed merger will result in the creation of the single largest
retailer of building material, hardware and related products in South Africa.

The market is highly concentrated with only four retailers that have a national footprint.

Cashbuild (acquiring firm), is the largest corporate retailer by number of stores at the national level.

TBC (target firm) , is the 2nd largest corporate retailer by number of stores at the national level (including BUCO stores and other
specialist/single specialty stores).

At a local level, the Commission found that the merging parties’ stores overlap in over 80 townships. In some of the affected townships, the merging parties compete mainly with independent retailers who do not exert a significant competitive constraint on the merging parties.

The proposed merger was likely to strengthen the buyer/bargaining power of the merged entity.

Competitors who made submissions to the Commission complained about the buyer power that the merged entity will achieve as a direct result of the proposed merger.

Merging parties can use their buyer power to exclude their rivals from competing or growing in the townships or rural areas.

Dept of Trade Industry&Competition stated that the
proposed merger will result in the largest single retailer of building hardware in the country

The approval of the transaction by the Competition authorities (a material outstanding suspensive condition) has resulted in both parties agreeing to terminate the transaction.

This was an ambitious attempt by Cashbuild.

Why was Pepkor willing to sell the Building Company?

Pepkor wanted to streamline its portfolio of businesses in order to focus on its core business of discount and value retail.

Who owns Pepkor?

https://twitter.com/MaanoMadima/status/1412722867746312194?s=19

Which other recent decision by the Competition Commission didn't sit well with the parties involved?

It was Grand Parade Investments' intentions to sell Burger King South Africa to ECP Africa Fund.

https://twitter.com/MaanoMadima/status/1422137918731268096?s=19

Is this kind of decision unique to South Africa? No.

Is there a recent international deal that can demonstrate this point? Yes. See the tweet below. This was also an ambitious attempt.

https://twitter.com/MaanoMadima/status/1419706450331508737?s=19