COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 86/LM/Aug00
In the large merger between
Investec Group Ltd
and
Frame Group Ltd
REASONS FOR THE TRIBUNAL’S DECISION
Approval
The Competition Tribunal issued a Merger Clearance Certificate on 6 September 2000
approving the merger between Investec Group Ltd and Frame Group Ltd without
conditions. The reasons for approving the merger are set out below.
The merger transaction
The primary acquiring firms are Investec Group Ltd, Newinvest 80 (Pty) Ltd,
Yellowfield Investments (Pty) Ltd and Frame Investment Holdings Ltd.
Investec is controlled by Investec Holdings, a public listed company on the JSE.
Newinvest is controlled by JGM nominees (Pty) Ltd. Yellowinvest is a wholly owned
subsidiary of Republic Nominees (Pty) Ltd and Frame Holdings is controlled by Fynne
Holdings Ltd, also a nominee company. Both Yellowinvest and Frame Holdings are shelf
companies, which have not traded before.
Yellowfields, Frame Investments and Investec represent three substantial interests in the
merged company, that of David Sable as to 37,5%, David Bowles as to 37,5%, Investec
as to 10% and management as to the balance of the shares.
The primary target firm is the Frame Group Ltd, a company listed on the JSE. Seargreg
Investments (Pty) Ltd, which is 50% owned by Seardel and 50% owned by Frame
chairman Roy Sable, has a 46,9% shareholding in Frame. There are approximately thirty
companies in the Frame Group, some active and some dormant.
The merger consists of three transactions, namely, a restructure, a sale and a scheme of
arrangement.
• Frame will be restructured to become a holding company with Consolidated
Textiles as its “first level” subsidiary. All the other first level subsidiaries of
Frame will become “second level” subsidiaries and will be controlled by
Consolidated Textiles.
• In terms of the sale agreement, Newinvest will acquire all the shares in
Consolidated Textiles. Yellowfields holds 40%, Frame Investment Holdings 50%
and Investec 10% of the shares in Newinvest.
In terms of the merger agreement, Investec, on 24 August 2000, proposed a
scheme of arrangement between Frame and its shareholders in terms of section
311 of the Companies Act to acquire all the shares in Frame from its shareholders.
Evaluating the merger
The relevant product market
Frame derives its income through investments and its trading subsidiaries derive their
income through the manufacture and sale of textiles, as well as the rental of commercial
and industrial properties. The Frame Group is involved in the textile industry through
Frame Spinning Mills, Frame Woven Fabrics, Frame Knitting Manufacturers, Frame
Manchester Manufacturers Frame Fibres, Romatex Ltd and Confram Property Holdings
Ltd.
Investec is a specialist bank, which provides banking services, such as investment
banking and principal transaction, corporate banking and interest rate activities, private
client group and asset management.
Effect on competition
None of the principals in the Investec Consortium have any interest in the clothing
industry except the Sable family, which owns Gregory Knitting Mills (Pty) Ltd, a small
industry except the Sable family, which owns Gregory Knitting Mills (Pty) Ltd, a small
privately owned company with a turnover of a tenth of that of Frame. Although it is not
quite clear what influence Gregory Knitting Mills has had in the past it would appear that
it is not a significant player in the market in relation to the size of a company such as
Frame.
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There is no product overlap between the parties except possible in the area of asset
management, which may include property management. However, this overlap is
negligible.
Public interest considerations
The transaction is a sale of shares and will not have any affect on employment or any of
the other public interest issues referred to in section 16 of the Act.
D.H. Lewis Date
Concurring: N.M. Manoim, P.E. Maponya
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