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Shepco acquires shares in Haggie Rand

Shepco acquires shares in Haggie Rand

MINING and industrial equipment manufacturing concern, Shepco Industrial Supplies (Shepco) has acquired a significant shareholding in Haggie Rand Zimbabwe (Haggie Rand) for an undisclosed amount.

The two parties approached the Competition and Tariff Commission (CTC) in March this year seeking approval of the deal, which has since been accorded.

The acquisition comes barely a year after Haggie Rand Zimbabwe parent company, the Industrial Development Corporation of South Africa, invited suitors saying it was exiting the Bulawayo-based firm.

Shepco is a business group with mining, industrial and manufacturing operations of nails, bolts and nuts, spares and maintenance for the mining industry, mining equipment (locomotives, loaders, co-pans, conveyor rollers), and distributing safety wear.

Haggie Rand produces steel wire products including wire drawing, wire rope, aluminium conductors and chains and fittings.

The commission defined the relevant market as the drawing of wire in the whole of Zimbabwe, and manufacturing and distribution of nails in the country.

Due to the customer supplier relationship between activities of the merging parties, the merger was classified as vertical. Haggie Rand is involved in wire drawing whereas Shepco is a manufacturer and distributor of wire nails.

“Competition analysis considered theories of harm affecting vertical mergers namely input and customer foreclosure,” CTC said in its second quarter report.

“Input foreclosures arise when Haggie Rand restricts access to nail wire that it would have otherwise supplied to Shepco’s competitors such as Coal Zim, Survival Fasteners, Tassburg Fasteners and other competitors outside the merger.

“Haggie Rand is producing way below its production capacity due to working capital challenges, constituting at most 1% of the market. Its current investors are unwilling to inject funding to resuscitate operations hence Haggie Rand is severely undercapitalised.”

CTC further noted: “Market power is one of the prerequisites to engage in input foreclosure.

“In this instance, Haggie Rand does not have the ability to engage in such a practice as it is a very small player.

“Moreso, 90% of locally drawn wire is imported.

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