COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 24/LM/Feb00
In the large merger between
Imperial Holdings Limited
and
National Airways and Finance Corporation Limited
Reasons for the Competition Tribunal’s Decision
Approval
1. The Competition Tribunal issued a Merger Clearance Certificate on 15 March
2000 approving the merger between Imperial Holdings Limited and National
Airways and Finance Corporation Limited (“NAFCO”) without conditions. The
reasons for our decision to approve the merger without conditions are set out
below.
The merger transaction
2. The primary acquiring firm is Imperial Holdings Limited and the primary target
firm is NAFCO, a subsidiary of Lonrho Africa PLC.
3. Imperial Holdings acquired NAFCO in 1999 from Lornho Africa who had
decided to sell subsidiaries in its noncore business. Although the transaction
was concluded on 14 July its effective date is 31 March 1999. This merger
has accordingly been notified in terms of Schedule 3 of the Act.
Evaluating the merger
4. Both the merging parties are involved in the aviation industry. NAFCO’s core
business is the sale and maintenance of small to mediumsized private
aircraft. The company also finances the sale of small to mediumsized aircraft
and charters them out on behalf of the owners.
5. Imperial Holdings controls two other companies involved in the aviation
industry. The one is Luftmeister Air Limited, which Imperial acquired in April
1999. This company specializes in freight carriage; it also provides charters in
the tourism industry. The other company is SAFAIR Limited, which charters
and leases large commercial aircraft to companies like SAA and COMAIR.
Imperial Holdings acquired SAFAIR in December 1998.
The relevant product/services market
6. The relevant services market is the small aircraft charter market. NAFCO
deals with private owners of aircraft who buy the aircraft and contract with
NAFCO to charter the aircraft on their behalf. There is an overlap in this
market with Luftmeister Air which is also involved in the charter of small
planes in the tourism industry.
The relevant geographic market
7. The Tribunal does not have enough information to determine whether the
geographic market is limited to South Africa or is an international one. For the
purposes of this decision it is not necessary to decide this. As appears more
fully in paragraphs 8 and 9 below, the Tribunal is satisfied that there are no
competition concerns raised by this merger even when the relevant
geographic market is limited only to South Africa.
Impact on competition
8. There is an overlap between Imperial’s business (because they control
Luftmeister) and that of NAFCO in the small aircraft charter business. This
overlap causes no competition concerns because there are many other
businesses providing the same service with the result that this merger is
unlikely to give the Imperial Group market power. The biggest competitors for
NAFCO in this market at the moment are ROSSAIR and EXECUJET.
According to NAFCO’s estimates the three companies at the moment have
about 50 (fifty) percent of the market. There are several other smaller
companies and individuals who own aircraft and charter them out.
Furthermore, entry barriers into this market are very low; virtually every
aircraft owner can enter the market by making the aircraft available for
charter.
9. The Tribunal agrees with the Commission that this merger raises no
competition concerns. The overlap referred to in paragraph 8 above is
unlikely to give Imperial and NAFCO a dominant share of the market and they
are therefore unlikely to be able to exert market power. The fact that entry
barriers into the market are low and that the market is potentially
geographically very wide makes it a competitive market that is hard to
dominate.
Public Interest Considerations
10. There are no public interest concerns raised by this merger; according to the
information supplied by the parties, no job loses will result from the merger
because, in terms of the merger agreement, their businesses will not be
combined and they will continue to operate as they did prior to the merger.
N.M. Manoim Date: 28 March 2000
Presiding member
Concurring: H.D. Lewis, P.E. Maponya