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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: LM104Oct23
In the matter between:
MOMENTUM METROPOLITAN STRATEGIC
INVESTMENTS PROPRIETARY LIMITED
Primary Acquiring Firm
And
INVESTMENT MANAGERS GROUP
PROPRIETARY LIMITED AND ROYAL
INVESTMENT
MANAGERS PROPRIETARY LIMITED
Primary Target Firm
[1]
On 23 January 2024 the Tribunal conditionally approved the large merger
whereby Momentum Metropolitan Strategic Investments (Pty) Ltd (“MMSI”),
intends to acquire the entire issued share capital of Investment Managers
Group (Pty) Ltd (“Investment Managers”) and 50% of the shares in Royal
Investment Managers (Pty) Ltd (“Royal Investment”).
The parties and their activities
Acquiring Firm
[2] The primary acquiring firm is MMSI. MMSI is incorporated in accordance with
Panel : L Mncube (Presiding Member)
: A Wessels (Tribunal Member)
: M Mazwai (Tribunal Member)
Heard on : 21 December 2023
Order issued on : 23 January 2024
Reasons issued on : 19 February 2024
REASONS FOR DECISION
competitiontri bunal
SOUTH AFRICA
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the laws of South Africa and is a wholly owned subsidiary of Momentum
Metropolitan. MMSI does not control any other firms. Momentum Metropolitan
is a company incorporated in accordance with the laws of South Africa and is
not owned or controlled by any other firm. Momentum Metropolitan controls
numerous firms within South Africa. MMSI, Momentum Metropolitan and all
firms directly or indirectly controlled by Momentum Metropolitan will
collectively be referred to as “the Acquiring Group”.
Target Firm
[3] The primary target firms are (i) Investment Managers and (ii) Royal
Investment. Investment Managers and Royal Investment are both companies
which are incorporated and registered in accordance with the laws of the
South Africa.
[4] Investment Managers is wholly controlled by RMI Investment Managers
Group (Pty) Ltd (“RMI IMG”). Investment Managers controls the following
firms: RMI Investment Managers Affiliates 2 (Pty) Ltd (“AFF 2”) as to 51%.
The balance of the shares in AFF 2 (49%) are held by MMSI, the primary
acquiring firm in the instant transaction. AFF 2 controls RMI Investment
Managers Affiliates 2B (Pty) Ltd (“AFF 2B”) as to 70%. Royal Bafokeng RIM
(Pty) Ltd (“RB RIM”) holds the balance of the shares.
[5] Royal Investment is jointly controlled by RMI IMG and Royal Bafokeng
Investment Holding Company Proprietary Limited (“RBI”) as to 50%
respectively. RMI IMG is ultimately controlled by OUTsurance Group Limited
(“OUTsurance Group”). Investment Managers and Royal Investment will
collectively be referred to as “the Target Group”.
Activities
[6] The Acquiring Group is in the business of financial services, and it offers life
and non-life insurance, employee benefits including healthcare and retirement
provision, asset management, property management, investments and
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savings, healthcare administration and health risk management, and client
engagement solutions. Of relevance to the proposed transaction, is the
Acquiring Group ’s asset management services.
[7] The Target Group invests in asset management firms in respect of which they
take minority, noncontrolling stakes. To elaborate, the Target Group invests in
emerging and established financial services businesses in the asset
management space.
Competition Assessment
[8] There is no horizontal overlap between the activities of the merging parties.
[9] The Target Group comprises investment companies and has a non-controlling
interest in firms active in the market for the provision of asset management
services and can appoint directors in those firms.
[10] Post-merger, the Target Group will be controlled by the Acquiring Group,
which is active in the asset management space, and that the Target Group
has minority interests in the Affiliate Firms which are also active in the asset
management space.
[11] Put differently, in the current transaction, as a direct result of the merger, the
Acquiring Group will have indirect shareholding interest in the following firms
which are active in the broad market for the provision of asset management
services: [Firm 1]; [Firm 2]; and [Firm 3].
[12] We considered whether the cross-shareholding might facilitate the exchange
of commercially sensitive information between the Acquiring Group and the
RIM Competing Firms’ competing businesses post-merger, especially as the
Target Group has board representation in respect of the RIM Competing
Firms.
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[13] The merging parties submit that the proposed merger, is unlikely to raise any
coordinated effects concerns or information sharing concerns because the
RIM Competing Firms are generally small and tend to target different
customer segments in respect of asset types, portfolios, investment
philosophy and investment strategies. The merging parties have also
tendered a condition to address the risk of information sharing posed by the
cross-shareholdings created by the proposed transaction. The condition
provides that merging parties will design and implement a confidentiality and
information exchange policy to the satisfaction of the Commission which shall
stipulate, inter alia, that the employees and board members of the merging
parties appointed in competing firms shall not share any competitively
sensitive information. The Commission augmented the conditions to align with
best practice. This condition has been attached as Annexure A to our
reasons.
[14] No third party raised any competition concerns about this aspect of the
proposed merger.
[15] Therefore, in light of the proposed condition, we do not consider it likely that
the proposed merger will result in a prevention or lessening of competition.
Public Interest
Effect on employment
[16] The merging parties provided a firm undertaking that no merger specific
retrenchments will take place because of the proposed transaction. The
employee representatives contacted by the Commission indicated that there
were no concerns raised by employees.
[17] We are of the view that the proposed transaction is unlikely to raise significant
employment concerns.
The effect of the merger on the promotion of a greater spread of ownership by
historically disadvantaged persons and workers in firms in the market
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[18] Momentum Metropolitan has a 29.7% shareholding held by historically
disadvantaged persons (“HDPs”) based on its latest Broad-Based Black
Economic Empowerment Certificate (“B-BBEE).
[19] The merging parties indicate that Investment Managers has a %
shareholding held by HDPs. The HDP shareholdings in Investment Managers
are held through RMI IMG.
[20] With respect to Royal Investment, the merging parties indicate that it has
% shareholding held by HDPs. These are held through RBI a firm that is
% owned by HDPs. Since RBI has % shareholding in Royal Investment,
this means that Royal Investment has % HDP Shareholdings. In addition to
this % shareholding by HDPs held through RBI, Royal Investment has an
effective % HDP shareholding held through RMI IMG.
[21] Furthermore, the merging parties have submitted that the proposed
transaction will promote ownership by workers as there is a 3.5% ESOP in
place within the Acquiring Group referred to as the iSabelo ESOP. iSabelo
was established in 2021 as an inclusive ESOP to benefit all permanent,
South-African based employees of the Acquiring Group.
[22] Post-merger, all qualifying employees of Royal Investment and AFF 2, being
the only entities within the Target Group in which there are employees, will be
included in the iSabelo ESOP.
[23] We are of the view that the proposed transaction is unlikely to raise significant
negative effects on the promotion of a greater spread of ownership.
Conclusion on public interest
[24] We are not aware of any other public interest concerns arising in this case.
Third party views
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[25] No third parties, w hether customers or competitors, expressed concerns
about the proposed merger to the Tribunal.
Conclusion
[26] We therefore recommend that the proposed transaction be approved subject
to the conditions attached hereto as Annexure A .
Signed by:Liberty Mncube
Signed at:2024-02-19 15:22:50 +02:00
Reason :Witnessing Liberty Mncube
Presiding Member
Professor Liberty Mncube
19/02124
Date
Concurring: Mr Andrea s We ssels and Ms Mondo Mazwai
Tribunal Case Manager:
For the Merger Parties:
For the Compe tition
Commission:
Princess Ka-Sibeto
Billy Mabatame la, Themba Mahlangu and
Nomthan dazo Mnda w eni
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