COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM097Oct23
In the matter between:
3 Sisters Proprietary Limited Primary Acquiring Firm
And
Capespan Group Proprietary Limited Primary Target Firm
Introduction
[1]
On 12 December 2023, the Competition Tribunal (“Tribunal”) conditionally
approved the large merger whereby 3 Sisters (Pty) Ltd (“3 Sisters”) intends to
acquire the entire shareholding interest in Capespan Group (Pty) Ltd
(“Capespan”).
The parties and their activities
Acquiring Group
Panel : L Mncube (Presiding Member)
: A Wessels (Tribunal Member)
: G Budlender (Tribunal Member)
Heard on : 11 December 2023
Order issued on : 12 December 2023
Reasons issued on : 15 January 2024
REASONS FOR DECISION
[2] 3 Sisters is a company incorporated in South Africa. It is 100% controlled by
Agrarius Agri Value Chain RF (Pty) Ltd (“Agrarius OpCo”) 1, a ring-fenced
private company. 3 Sisters does not control any firm.
[3] Agrarius OpCo is held by the trustees for the time being of the Agrarius Agri
Value Chain Owner Trust (“Agrarius Agri Trust”) 2 and managed by 27four
Investment Managers Proprietary Limited (“27four”) (“the Acquiring Group”).
[4] Agrarius OpCo is dedicated to advancing sustainability in the agriculture
industry through innovative Shari'ah compliant funding models. It is intended
that Agrarius will, in time, exit and transfer its beneficial ownership of 3
Sisters to the Transaction Principals.
[5] The Acquiring Group is an investment vehicle and has investments in several
firms active in vegetable and fruit farming, livestock farming, and fruit export.
The Acquiring Group does not have any shareholding in its investments (or in
the firms it invests in), and the arrangement is limited to the provision of working
capital finance in the context of funding transactions except its 50% interest in
a potato farming business, Groenplaats Farming Proprietary Limited
(“Groenplaats”).
Target Group
[6] Capespan is controlled by Zeder Financial Services Limited (“ZFS”), 3 which is
in turn controlled by Zeder Investments Limited (“Zeder”), a public company
trading on the Johannesburg Securities Exchange. Capespan controls several
firms worldwide 4 (“the Target Group”).
1Agrarius OpCo is fully funded through Agrarius Sustainability Engineered RF Limited (“Agrarius
ListCo”), a JSE-listed special purpose investment vehicle, classified as a ring-fenced public company.
Agrarius ListCo is held by the trustees for the time being of the Agrarius Sustainability Engineered Asset
backed note programme owner trust. The trustee of this trust is a corporate trustee service provider,
TMF Group B.V.
2 The trustees of Agrarius Agri Trust are Messrs Werner Opperman and Vic du Preez.
3With a 92.98% shareholding. The balance of the shareholding in Capespan are held by several minority
shareholders including the following shareholders who are HDPs: [Mr Y] as to 0.07% and The [ X ] Trust
(the beneficiaries of which are HDPs) as to 0.33%.
4 In South Africa, Capespan controls the following firms: Capespan (Pty) Ltd (100%), Capespan South
Africa (Pty) Ltd (100%), Capespan Farms (Pty) Ltd (100%), Valam (Pty) Ltd (100%), Capespan Izithelo
(Pty) Ltd (49%).
[7] The Target Group is a vertically integrated fruit producer with global marketing
capabilities servicing growers and customers in key international markets. It
focuses on grapes and citrus. It operates through a primary agriculture farming
division consisting of several primary production units as well as a sales and
marketing division, with a global footprint in sourcing and marketing fruit.
[8] Approximately % of the Capespan's sales are exports and approximately %
is sold locally.5
Transaction and rationale
[9] In terms of the proposed transaction, 3 Sisters intends to acquire 100% of the
issued ordinary shares in Capespan. On implementation of the proposed
transaction, 3 Sisters will have sole control over Capespan.
[10] The Acquiring Group’s rationale is to provide the funding required by the
Transaction Principals to facilitate their sustainable acquisition of the
primary target firm.
[11] The rationale for the Target Group is indicated as the disposal is in line
with Zeder Investment's (the controlling shareholder of Capespan) strategic
review of its various portfolio of assets and is pursuant to the evaluation of
approaches received. The proposed transaction is part of a value unlock
initiative to Zeder shareholders.
Competition Assessment
5 Revenue generated from the Capespan's own farms (including the Pome farms) is approximately
%.
[12] We considered the activities of the merging parties and found that the proposed
transaction does not result in any horizontal overlap as the Acquiring Group
does not control any firms that are active in the production and distribution of
citrus fruits and grapes, the market wherein the Target Group is active. While
the Acquiring Group holds 50% shareholding in Groenplaats, it is a producer of
potatoes and not citrus and grapes.
[13] Accordingly, on the basis of the evidence before us, we find that the proposed
transaction does not give rise to a likely prospect of significantly lessening
competition in the relevant markets.
Public Interest
Effect on employment
[14] Building Wood and Allied Workers Union of South Africa (“BWAWUSA”) raised
concerns of behalf of the Target Group’s employees that the proposed
transaction will result in possible changes to the employees’ terms and
conditions of employment, and a loss of the employees’ benefits including their
right to be members of the union that will be based on threshold.
[15] In response to the concerns, the merging parties indicated that there will be
no merger-specific changes to the existing terms and conditions of
employment and no loss of benefits such as the right to be members of
BWAWUSA based on threshold. Furthermore, that there is no expected
duplication of jobs as there is no overlap between the activities of the merging
parties, the Acquiring Group is an investment firm and is not in the same day-
to-day operational business as the Target Group.
[16] The Commission and merging parties proposed the approval of the proposed
transaction subject to a Condition that for a period of 3 (three) years from date of
implementation of the transaction, the merged entity shall not retrench any
permanent or fixed-term employees.