The Competition Commission South Africa has recommended the approval of the acquisition of Turbomeca Africa (TMA) by state-owned defence conglomerate Denel.
In its weekly media statement issued on 25 May, the Commission said the recommendation was given to the Competition Tribunal. It added that the proposed transaction “is unlikely to substantially prevent or lessen competition in the affected markets since it is a move from joint to sole control of TMA by Denel.” TMA is 51% owned by Safran Helicopter Engines and 49% by Denel.
The Commission stated that the proposed transaction “raises public interest concerns in that there are retrenchments that will occur as a result of this merger. In order to remedy these concerns, the Commission recommends that this transaction be approved on condition that the number of merger specific retrenchments is capped and that other merger specific retrenchments are not effected before the expiration of two years from the implementation of the merger. The conditions also require that the merging parties adhere to the relevant Labour Relations Act processes if they proceed to effect the retrenchments.”
According to Safran Helicopter Engines, TMA, located in Kempton Park, employs more than 270 people, although the 2016 Denel annual report lists the employee numbers as 238 for the 2015/16 financial year.
Turbomeca Africa makes parts for helicopter engines including gears, gearbox castings, shafts and couplings. TMA also provides services such as marketing, sales, after-sale support and maintenance, repair and overhaul of engine components for aerospace, marine, land and industrial applications.
TMA manufactures engine components for Safran Helicopter Engines, a wholly-owned subsidiary of France’s Safran SA, as well as Rolls Royce and Denel. The supply of complete Tay gearboxes to Rolls-Royce Tay as single-source supplier is an important part of the business.
Safran Helicopter Engines noted that TMA supports over 40 customers in 20 different countries, including the South African Air Force, South African Police Services, Starlite Aviation, Wild Dog and Savannah Helicopter Maintenance. Turbomeca Africa performs around 200 repairs and overhauls each year for three engine types: Turmo IVC, Makila 1 and Arrius 2.
Turbomeca Africa was set up in 2002 following the September 1999 order for 30 AgustaWestland A109 Light Utility Helicopters for the South African Air Force (SAAF). These are powered by the Arrius 2K2 engine, of which Turbomeca is the exclusive supplier.
According to the 2016 Denel annual report, TMA has its engines flying on 34% of civil helicopters in South Africa and 75% of military helicopters, including the Super Puma and Rooivalk (Makila).
For the 2015/16 financial year, Turbomeca Africa recorded revenue of R569 million (including R237 million from exports) and a profit of R28 million. This compares to revenue of R522 million for the 2014/15 period and profit of R75 million.
The acquisition of Turbomeca Africa would be the latest in a string of mergers and acquisitions by Denel, which over the last few years has included the BAE Systems Land Systems South Africa (LSSA), now known as Denel Vehicle Systems, the establishment of Denel Integrated Systems and Maritime (Denel ISM), and the merger of its Aviation and Aerostructures businesses to create Denel Aeronautics.